Tips On How To Start An Investment Club
Investment club is formed by a group of people who pool their money for joint investments. If you are a new to investing in stock market and have limited funds, starting an investment club is a great way to learn from other investors and get hands on experience in investing.
Here are some tips to starting an investment club.
1. Make sure all members understand the risks of investing. Many people who invest think they are going to be very successful, and are not prepared to lose all of their money. Unfortunately, there are no guarantees when it comes to the stock market. No one should invest money they are not willing to lose.
2. Find the right people who share the same investment objectives and goals. It is easier to get along with right minded people and learn from each other.
3. Make sure all club members agree to the partnership agreement and any other rules.
4. Join the National Association of Investors Corporation (NAIC) that provides support, information and tools on starting an investment club and investing, and publishes a monthly investor-learning magazine.
5. All members must agree to make a monthly contribution. The typical range of contribution is $20 to $100 a month. Members who contribute more than the required contribution are allowed greater share of profits.
6. Decide on how to meet and the frequency of meetings. For the initial setting up of the club, it may be best for everyone to meet in person. If all meetings are held online, it may be good to meet in person once or twice a year for social interaction. To keep up to date, it is recommended to meet 1-2 times a month.
7. Start with a small number of people. It is easier to come to an agreement when there are fewer members. When the club is established and all formal procedures are in place, new members can be invited to join.
8. Education is the main goal of an investment club. An investment club made up of educated investors will be more successful and cohesive than an investment club which is solely focused on making a profit.
9. Every investment club must have a well-defined investment style or investment philosophy. There must be clear selection criteria such as what type of stocks to invest, the acceptable risk tolerance level and rate of return. All club members should be aware of and agree to the investment style of the club.
Starting and running an investment club is an invaluable learning experience, where you can leverage on the expertise and knowledge of other investors. Investment clubs facilitate the exchange of ideas and collective decisions that are likely to produce sustainable returns.