Investment Clubs

Some novice investors will eventually get to the point where they will feel safe buying stocks directly. However, that prospect can be daunting as well. For these individuals, some alternatives are available and can help not only to ease the apprehension, but also provide an education along the way. An investment club is a good place to start. There are many ways to join or form an investment club. One of the best is to join the National Association of Investors Corporation, which supports over 8,600 investment clubs and has more than 90,000 individual members.

Valuable Resource

The NAIC ( is an association of individuals belonging to investment clubs.
They provide publications, forms, and advice from experts and fellow members.
Most clubs hold monthly meetings and members agree to deposit a fixed amount every month to pool together. At the meeting, the research shared by members is explained and discussed, and when appropriate the members decide which stocks to buy. Most clubs have about 15 members. Once club size moves above 20 or 25, it becomes difficult to keep the organization working smoothly and agreeing on a course of action.

Key Point

Anyone apprehensive about picking stocks on their own will benefit by looking into investment clubs as a way to pool resources and capital.
A wise starting point is to agree among members and potential members on an investing philosophy and how research is to be shared. Most NAIC members subscribe to a conservative theory and rely almost exclusively on fundamental analysis of stocks to develop a list of investment candidates. If a club is to take greater risks or speculate in the market, all members should agree; otherwise this strategy will not be appropriate, especially for those new to investing.

Key Point

Investment clubs work only if all members agree on the investing objective and appropriate risk level.
Investment clubs meet regularly every month, which is a good idea because it allows members to set aside the same time every month to attend meetings, and also lets people know how much time they have to complete their research before the next meeting date. The meeting is often held in a member's home, a local library, a church hall, or a coffee shop. The agenda for each meeting should be structured well, and should include updates on the portfolio's performance, research presentations by members, a talk by a guest speaker if available, and decisions about whether to invest in any additional stocks. The complete meeting should not exceed two hours at the most. Since investment clubs pool members' money, they need to be set up with a formal organization and contract. NAIC provides valuable help in deciding which organizational form to use for an investment club. In addition, club members might want to pick a broker by referral and vote; or they might decide to be completely self-directed and use one of the many online discount brokerages. Clubs generally need some form of organizational leadership as well. Clubs don't want to become overly formal, but electing officers and leaders of meetings just makes sense. At the very least, investment clubs need to elect a president or presiding partner, an assistant, a treasurer or financial manager, and a secretary or recorder. Investment clubs can provide a good starting point for you. The shared research and acquired experience of 15 people is a powerful force, and it helps many people to gain knowledge and experience efficiently and profitably. For many others, mutual funds have been a popular choice for many decades.
By Michael C. Thomsett
Michael Thomsett is a British-born American author who has written over 75 books covering investing, business and real estate topics.

Copyrighted 2016. Content published with author's permission.

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