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What you need to know about investment clubs

What is an Investment Club?

The definition of an investment club is simple: a group of people who share an interest in the stock market pooling their resources into one large investment. Defining how an investment club works is more complicated.

In most cases the investment club will be registered as a partnership and the members of the club will make decisions together on what stocks they consider to be a good investment risk.

The majority of the time the investment decisions will be made after some research has been done regarding the stock that is under consideration. This will be discussed at length further in this book.

An important feature of an investment club is that the members are there to have fun as they invest their money and learn about the stock market. Making a profit isn't the only goal of the club and members are encouraged to have fun as they invest their money.

An investment club isn't for those people who are looking for a fast way to make some easy money. People who want a quick turn around are discouraged from joining an investment group and investing on their own.

A main feature of the investment group is to start to learn how to invest your money and to invest for a long term rather than a short one.

There are several things that you should keep in mind if you are thinking about starting an investment club or have in interest in joining one that already exists.

Make sure that you understand all the reasons why you should start an investment group and the requirements needed to be successful as a group. The following is a list of important ideas and information that you should consider before starting your club:

· Be realistic . If you're starting an investment club to make a killing in the stock market, you'll most likely be very disappointed. The goal of an investment club is to learn more about the stock market and if you have dreams of becoming rich you'll be starting the club for the wrong reasons. Joining an investment club means joining for a long period of time.

· Expect to be an amateur . Starting an investment club doesn't mean that you have to be an expert on the stock market. In fact, an investment club is ideal for a group of amateurs who want to learn about how the stock market works and what it can do for them. An investment club is a safe environment in which you can invest a little bit of money and not worry about losing a large amount of your hard earned dollars when something unexpected happens.

· Amount of money to invest. Don't think that you need a lot of money for investment purposes to start an investment club. The opposite is in fact true: you don't need to have a lot of money to invest to start an investment club. You can set a minimal fee for each month's contribution that is fits into your budget. You'll have the chance to determine what the minimum monthly contribution should be each month when you have your first meeting of the investment club.

· Combined investment money. On your own you may not have enough money to invest in the stock market in a way in which you may be able to realize a profit. However, when you combine your investment dollars with the dollars of others in the club you'll have a significant amount of money to invest in the stocks that you've been watching and think may be successful. Keep in mind that just as there is strength in numbers there is also a shared sense of security when you're not investing alone.

· Diplomacy. One thing that you should keep in mind is that your voice will be part of the larger group and you may not always have a say in which stocks you want to invest in. If you're unable to sit back and let another decision take the place of something that you would rather see, then an investment club might not be for you. You'll need to have the ability to let the majority rule whenever a decision is made.

· Learning experience. You should be prepared to be satisfied to never realize a profit from the stock market. One of the important goals and features of an investment club is that you benefit from the learning experience of being with other people with the same interests in the stock market. If you never make a penny you should still be pleased with your participation as part of an investment group.

Starting your own investment club will be a pleasurable, and perhaps profitable, way to spend time with other people that share the same investment passion that you do.

You'll be able to learn about the stock market in a safe and secure environment with other people that understand your fascination with the stock market.

The Thrill of Investing

Investing in the stock market is a fun and exciting way to learn more about financing and more about investing your money successfully. When you start watching the stock market you'll see stock prices fall drastically overnight or jump madly into a crazy arc of profit.

This thrill can be exciting and fun but you need to determine if this type of risk taking with your hard earned money is something that you want to participate in or watch from afar.

You have to be very aware of the fact that you could lose the money that you've invested overnight. If your goal for your finances is to save money safely so that you can retire, then maybe you need to put your money into a savings account and watch it grow slowly.

However, if you're willing to take risks so that your money has the potential to increase fast and in large amounts, then you have the perfect personality for someone who should be part of an investment club.

People who are part of an investment club are willing to take chances so that they can make a profit, enjoying the entire process of the stock market and checking each day to see how their stocks have done overnight.

But they are also sane and rational when it comes to their money, wanting to retire with a nice sized nest egg as a cushion.

Investing in the stock market is one way that you can make large sums of money while having fun doing so.

When you invest in the stock market you need to be prepared to have some periods of time where you're operating at a loss. During those periods when the stock market is slow you're probably better off putting your money into a savings account in the bank.

But if you're patient and ride out the slow times of the stock market you'll come back with a bang and make more of a profit than if you had actually put your money into a savings account.

When you're part of an investment club you're combining your money with other investors who patiently wait through the slow periods of the market for your investment profits to pick up again.

There are several good reasons why investing in the stock market is both wise and profitable:

· You have the chance for much better results and profits than when you invest your money in annuity savings or into the bank. Your money will be much more “liquid”, meaning that you have the ability to move it around in the stock market which you might not be able to do if you lock your money into a savings account. This doesn't mean that you want to constantly buy and sell your stock. It does, however, mean that you'll have more control over where your money goes, what you do with it, and how much of it you want to invest into the stock market.

· When you invest in the stock market you'll have diversity with your savings and money that you get from other sources, such as inherited money, insurance, real estate, or your business ventures. If you have extra money that isn't spoken for by bills and other expenses you'll want to think about investing your money.

· You have the ability to realize some dreams in your life that you may not be able to meet if you didn't have the profit that you can make from investing. Playing the stock market means taking some of your dreams and making them a reality.

· You'll become much more knowledgeable about the investing and business environment. If you already have an interest in money investing then being part of an investment club is a great way to obtain more knowledge and share your similar interests with other people. You'll be able to meet on a regular basis with people who are learning about the stock market right beside you.

· When you invest in the stock market you're taking your finances into your own control. You're not counting on the government for your future financial requirements.

Being part of an investment club is exciting and fun. Making profit along the way is a great bonus and will encourage you even further.

Always keep in mind that you may never see a substantial profit for many years. This shouldn't discourage you, but rather it should inspire you as you do something that interests you.

Reasons For Starting a Club

Now that you know the thrill and excitement that investing in the stock market can bring to your life you'll want to know some of the reasons why people start investment clubs. These reasons include:

· Combined investment knowledge . When you work with a group of people who have a similar interest in the stock market you'll be able to have a huge amount of combined knowledge working in your favor. Even those complete newcomers to the stock market will have a valued opinion and pieces of information that when you add it all together equals a lot of thinking power. So long as you have a plan of diplomacy you'll be able to make decisions about where you're going to invest your money in such as way as the choice is of the majority and is based on a great deal of thought. If you're unable to take direction from a group of people that you're working with then an investment club may not be for you.

· Personal risk is low . Even though the money that your club has to invest can be quite large, your own personal contribution can be very minimal. This way you're not risking a lot of your money while you learn how the stock market works. You can still make some great investments but your loss factor will be manageable for you. Keep in mind that when your club makes a profit, no matter how small, the amount must be distributed throughout the membership.

· More room for profit . Recent studies of investment clubs show that when a group of people make investment decisions after a series of discussions and debates, the potential for profit is greater than when individuals make their own decisions about where and how to invest their money.

· Similar interests . Members of an investment club enjoy getting together on a regular basis to discuss the investment market and to learn more about a subject that greatly interests them.

· Invest regularly . Investment clubs have the ability to invest in the stock market even when the market is dropping or is slow. Because the money in spread out among a group of members the room for huge personal loss doesn't exist.

· Reinvest . Since most members are part of an investment club for fun, and to learn more about the stock market, there will be more room for reinvesting the gains and dividends that are earned from successful investments. When you invest on your own you won't be as willing to part with earned investment money and reinvest everything that you gain.

· Spread out investments . When you're investing with a group of people you can diversify your investments and not limit yourself to just one or two market choices.

There are many other reasons why it's mutually beneficial for people to join together in an investment club. The main reason is that people have a genuine interest in sharing their investment experience and knowledge with others with the same interests.

Personal Reasons For Joining an Investment Club

There are personal reasons that you'll want to start or join an investment club. You'll finally have the opportunity to play the stock market in a safe environment that is low risk and lets you learn more about a subject that greatly interests you.

Personal reasons for joining an investment club include:

· Confidence . You may feel safer and more secure when you learn about the investment world with a group of other people with similar interests.

· Starting out . If you've always wanted to invest in the stock market but been reluctant to lose large sums of money because you don't know what you're doing, then an investment club is great for you since you can be part of a large investment team.

· Low investments. If you only have a small amount of money to invest each month, such as $25 to $60 dollars, then an investment club is perfect for you. You can invest small amounts of money into the larger combined total of the entire club.

· Investing education. If you've always wanted to learn more about investing in the stock market, but you keep putting your interest aside, an investment club is a great way to inspire you to attend meetings and learn more about how to invest.

· Socializing . Getting together with a group of people with similar interests is an enjoyable way to learn about something that you've always wanted to be knowledgeable about.

· Inspiration . When you can safely work with people with similar interests you'll be inspired to take chances and learn as much as you can about investing.

There are many other personal reasons why you should start or join an investment club. The main thing is that you want to invest some of your money in a way that is fun and educational.

Requirements of a Successful Investment Club

For an investment club to be successful there are several requirements which need to be in place so that the club runs and functions smoothly. When a group of people come together with similar interests they need to have certain conditions that are met and basic rules that are followed.

Each member of the club needs to be certain of the expectations and needs to have some simple attributes that are met.

Some of these requirements are:

· Investment goals . Each member of the group needs to have the same goal in mind and the same methods of achieving that goal. If some members of the group are only interested in making a profit, instead of learning more about investing and the details involved, there will be a divided set of goals. All members of the club should have the same philosophy about investing.

· Long term goals. Members of the club should be clear on what the long term goals of the club are all about. There should be an understanding established of what amount of the profits that are realized from investments are going to be held and which amount is going to be reinvested immediately back into the stock market. There should be an equal amount of growth and stability that is agreed upon.

· Organized communication. Club members should communicate on a regular basis. Part of the experience of starting an investment club is getting together to enjoy similar interests and goals.

· Mandatory meetings. It's important that members of the group are able to attend all meetings. When there are decisions that need to be made about ongoing investments and future investments it's important that all members are part of the decision process. If the group decision is held up because some members don't attend regularly the endeavors of the investment group are jeopardized.

· Stock decisions. Before any stock is purchased or sold it will be required that all members of the investment club are part of the study of these stocks and part of the final decision.

· Internet access. Members of the investment club will want to have computers with Internet access so that they can keep track of the market from their homes and so that they can communicate with other members on a frequent basis. The importance of good communication between members of the group can't be stressed enough.

· Accountability checkpoints. It will be very important that the investment club have checkpoints in place that account for all investments, profits, losses, and other money issues. These checkpoints should be readily available for all members of the club to read at point in time.

An investment club needs to run smoothly with a great amount of reliability and confidence among its members. When all members of the club expect and meet the same requirements everyone works together in a way that induces success and, hopefully, some profitability.