How to start an investment club: essential tips to help you navigate the world of investments

Starting an investment club has enormous benefits. Below a few tips on How to start an investment club

How to start an investment club

• Start by identifying and talking to individuals (family and friends) who are interested in investments and passionate about building wealth and attaining financial independence. Make sure you look at for people with diverse backgrounds, expertise and experience in another to bring some richness and diversity. A Number between six and twenty is ideal for the takeoff of the investment club.
• Distribute credible information about investment clubs to any one who has indicated interest. Perhaps you may want to share this article with some friends.
• Gather all interested members for a preliminary meeting to discuss (A) the name of the club (B) the vision and principal activities of the club (C) membership guidelines and responsibilities (D) and possibly to elect a leader who will manage the affairs of the club
• Register the club if possible as a limited liability company with all members as directors.
• Research and choose one or two stock broking firms to help manage your investment portfolio.
• Agree on a minimum sum to be contributed monthly by members. Make sure that the sum is something that everyone can comfortably afford.
• Develop a learning plan for members. This will allow members grow their investment acumen through a structured learning process.
• Agree on a regular meeting place and time. A small club size of not more that 15 will allow meetings to be held in living rooms.
• Choose a good broker. Properly research a good brokerage services that could manage the portfolio of the club and also contribute to the development of the clubs goals through regular consultations and visit to the club.
• Set a minimum investment guidelines or framework for investing, this will provide a common ground on investment philosophies and approach.

Common pitfalls to avoid when setting up an investment club

Investment clubs like many other things offer much promise. In other however to really enjoy these benefits there is need to avoid a number of pitfallss. Here are a few:

Ensure that all legal formalities for the set up of the club are put in place: In other to effectively manage cases of unscrupulous behavior by any member of the club, it is important that the club be formally registered with the appropriate authorities and all legal agreements properly drafted. 

The problem of over seriousness: Never forget that one of the goals of the investment club is to learn about investment in an open, informal, exciting atmosphere. Ensure that your investment club activities even though seriously engaging but never the less exciting and fun filled.

The commitment of time: Picking the right stocks and making quality investment decisions is a time consuming affair. It is paramount that all members understand this and are commit their time to the activities of the club

Avoid having a one-man show: Sometimes there is a tendency for the principal founder or leader of the investment club to want to micromanage the club. He or she wants to do almost everything. This attitude has the ability to alienate others and subsequently deflate their morale in the club’s activities. It is important that everyone is engaged one way or the other in the activities of the club.

Risk management: The term risk management might seem like a big word that should be left for the big-boys of the financial universe however a small investment club needs it too. The club should have a proper accounting framework that shows how much money it has invested from its members, how it has been invested and what its present value is.

It should set limits on how much money can be invested in a particular stock and also identify a key set of investment fundamentals such as company’s earnings, growth, competition and future outlook.

Get rich quick investment plans or promises

Those who set up or join an investment club with the intentions of using it as a vehicle to make quick riches are likely to end up disappointed. Investment clubs are not meant for quick short term gains based on speculations but rather long term strategy driven investments based on good research on companies that are fundamentally sound