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Starting an Investment Club

By Edited Aug 17, 2016 3 4

Investment Clubs are Great for Conservative Investors

Starting private investment clubs became a very popular activity in the 1990's. However, with one recession beginning in 2001, followed by a few years of soaring stocks and GDP, and another recession beginning in 2008, the number of people who were interested in starting these types of groups declined. Today, with new consumer protection laws voted in by Congress, and the economy gradually improving, it may be an excellent time to consider becoming involved with stock investment clubs, again.

Investment Club Reports (38709)

Join an Existing Private Investment Club

The easiest way to participate in stock investment clubs and to learn about investing and the stock market is to join one that already exists. Talk to your friends, and call your local chapter of the National Association of Investors Corporation to see if there is a group in your area that is seeking new members. You can contact the National Association of Investors Corporation online at betterinvesting.org. However, if you cannot find an established group that wants more members, you may consider starting one your own. It is a wonderful way to make friends and learn about managing your investments at the same time.

If you are nervous about starting one on your own, use this direct link to the Amazon.com investment club books that are available to help you.

Invite Friends and Acquaintances to Join Your Club

If you cannot find a club that is already in existence, talk to your friends, neighbors and co-workers and see if you can find at least four or five other people who are interested in starting an one with you. Give some thought to the people that you invite. Do you want your group to be all men or all women, or would you prefer it to be a mixture of both? Do the people you want to invite have time to devote to meetings, and are they willing to do a little research into a variety of stocks? Are they interested in learning more about the stock market and other investments? Do you think they will get along with each other? Can they afford to invest at least $50 a month in the stock market … and not pull their money out again until they leave the club or the club disbands?

Join the National Association of Investors Corporation

The National Association of Investors Corporation (NAIC) is an organization that provides education, assistance, investment club accounting software programs, classes, conferences and additional information to investment clubs. If you want to be certain that your club is handling your money accurately and reporting tax information correctly, it is almost essential that you join the NAIC. Each member of your group needs to join and, in return, you will each be sent a monthly copy of their "Better Investing" Magazine. This magazine includes articles on specific stocks, as well as general information such as how to read an annual report, or how to understand P/E ratios. You will also receive schedules of classes that are being held in your area, as well as access to purchasing the necessary investment club software.

Elect Your Officers

Once you have chosen your group, have a casual gathering so everyone has a chance to meet. Then, hold your first election of officers. The most important officer your club will need is the treasurer. Your treasurer will eventually need to open an online brokerage account in the club's name, and learn how to use the NAIC tax software as well as the investment club accounting software that will help all of you keep track of your stocks. As time goes by, you will want to see whether your portfolio of stocks is increasing as a whole, and how each investment that you hold compares to the others. You will want to be able to quickly assess your profits and losses, and see how much your stocks are earning in dividends. Having the correct accounting software, and someone who is trained to use it, will make life easier for all of you. In most groups, the treasurer has no other duties. In other words, they are not expected to research and report on stocks or take on similar responsibilities.

In addition to the Treasurer, your club will want to have a President or Chairman to conduct the meetings, and a Secretary to keep the minutes. You may also want to have a Vice-President who gives a monthly "economic report" and leads the discussion about the overall economic trends and events that could affect the stocks your club is holding. Or, you may want to have a Vice-President who finds occasional speakers for your club, or who handles the social events. The job of Vice-President will be different for each group, and may not even be necessary in some smaller clubs.

Sign Your Members up for NAIC Classes

Before you buy your first stock, it would be a good idea for all the members of your new club to sign up and attend a few classes that are taught by the NAIC. The Treasurer, of course, will need to sign up for the classes that explain the tax software and the other investment club software.

The other members of your club will want to take classes that are designed to help them learn how to study stocks, read annual reports and understand research. Every member of your club, other than the treasurer, needs to be willing to learn how to research stocks, how to choose good stocks to recommend to the club, and how to follow the stocks that your club decides to purchase.

Get Your Investment Club Organized

Your club will also need to be organized as a legal entity. You will probably want to have Articles of Incorporation. The NAIC can assist you in this area, too. You will also want to come up with some general guidelines or suggestions that your club wants to follow. For example, a women's investment club that I belonged to encouraged the women to do their own research, without asking their husbands for help. That club also originally decided not to buy any stock that cost more than $50 a share … a rule that we disregarded frequently as the years went by! Your  may also want to set up some general guidelines regarding what you expect in terms of buying stocks that have a dividend, the P/E ratios that you hope to find, etc. Realistically, you will just want to set up some general guidelines for yourselves, but be flexible. Your ideas may change as time goes by.

Socialize with your Investment Club

Although most of your meetings will be purely business meetings, you may also want to take the time to socialize. For example, our group would sometimes have dinner at a restaurant chain in which we owned stock. We also had shopping trips to retail stores after we bought their stock. During the holidays, we would have a potluck dinner at one of our homes. After a few years, the core members of our club grew quite close!

Starting an investment club is a wonderful way to make money as well as friends. Starting one during the time when the stock market may be recovering from a recession could be the perfect time.

If you are interested in articles about financial topics, you may also be interested in reading:

Buy the Best Investment Club Accounting Software

Ethical Investment for the Socially Responsible Investor

How to Find Free Stock Research Websites

How to Use Value Line Stock Research Tools

The Long and the Short of Understanding Investment Terms

Starting a FOREX Investment Club

Photo courtesy of photoxpress.com

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Jan 21, 2011 12:47pm
Nice article! Love the idea of doing social things that correspond to particular investments.
Jan 23, 2011 1:15am
The club I was in disbanded a few years ago. You are right, maybe now would be a good time to join another. Good article, thanks for sharing.
Jan 26, 2011 11:47am
I've never belonged to an investment club before, but they sound like they are fun and educational. I will take your suggestions, and I will look for one in my area. Thanks for sharing.
Mar 10, 2011 3:34pm
Brings back memories of the Beardstown Ladies!
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