Reported by Stephen Kanyi
An investment club is a good way for investors, particularly those who are new to investing, to start their trade. It is also one of the best ways for investors to pool their minds and money together so as to make the best investment decisions—remember, two heads are better than one. Starting an investment club may be a challenging thing to do, particularly for young investors; however, the MotleyFool.com has made a summary of key things you have to do in order to start your club and keep it up and running.
Here’s a list of their recommendations below:
- Find people to make up your club. To get them, you need to start talking to friends and even family to see who is interested. An investment club needs to be formed of about 6 to 20 people. Few people might make it hard for the group to raise funds to invest while too many members may slow down or even halt the decision-making process in the group and also make it hard to find a place to meet.
- Consider possible personality clashes when selecting your group. You may also want to be careful when it comes to choosing members. If you mix novices and sophisticated investors, the novices may feel intimidated while the sophisticated members may feel bored or frustrated. You must make sure you make the mix just right. You have to set up a meeting for all the members to discuss issues. The meeting should be aimed at getting the members to agree on various issues.
- Make sure group members have similar or compatible investing goals. Agree on the amount of monthly contribution. This is a very vital issue and must be set carefully. Remember not to set the bar too high as this is a learning activity. There should also be room for one to contribute more than the monthly requirement.
- Make sure your investment approach matches with the group’s. It is also important for you to agree on a common investing philosophy and approach. For instance, some may want to find undervalued stocks while others may go for high flying stocks, such things need to be ironed out.
- Agree on a set of common ground references, instructions tools, and readings. For instance you can use the “Motley Fool Investment Guide” or Peter Lynch’s “One Up on Wall Street,” provided it is a credible source. You also need to set a regular meeting place, length, and format. The number of the members will determine where you will meet. For a large number you may consider meeting in a local library or church. You will also set how often you want to meet. Other things that may need to be settled include the name of the club and even snacks for the meetings.
- Determine how your club will be organized and the role of each member. You will also need to choose a broker. This might prove to be a tricky affair as you don’t want to be paying hefty commissions. You should find a broker that falls within your range.
- Have a plan for your club’s educational agenda. Take a list of members’ interests and expertise. This will help the group in making investment decisions.
- Keep your meetings fun, friendly and co-operative.