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Investment Clubs: For Fun and Profit
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If you want to get your body in shape, you can join a health club. You go every day, work out with other people, and take advantage of equipment you couldn't afford on your own.
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An investment club is like a health club for your money. You invest a little every month, discuss investments with other people, and pool your money to buy investments you might not otherwise be able to purchase.
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Typically, each member of an investment club pays a certain amount into the club's account up front and promises to put in a little more each month. Members of the club research stocks, decide on the ones they like, and vote on which ones they should buy. Profits from the investments are passed on to the members, depending on their percentage of how much they've invested in the club.
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In recent years, many investment clubs have gone virtual. Members can now meet online and chat 24/7 about investments (though arguably one of the benefits of an investment club is the in-person contact).
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Of course, there are drawbacks to investment clubs. For one thing, you're not in complete control of your investment. Since most clubs vote on which investments to buy, the group might not always do what you think is best. A related problem is that your group might not share your investment strategy. If you are a buy-and-hold investor, you probably will get frustrated with a club that trades stocks every month.
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Finally, clubs can be difficult to create, join, and manage. In addition, most aren't required to register with the SEC. However, for some people, they're a way to make investing easier and more enjoyable. For more information on how to form an investment club, visit the National Association of Investors Corporation online at www.better-investing.org. There also are a number of books that address all the common–and not so common questions–about investment clubs and how to start and run one.
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