If you are someone who would like to know more about investing, joining or starting an investment club can be a rewarding and educational experience. Many people feel more comfortable about learning about investing with other average folks when compared with talking to an "expert".
Is it a good fit for you?
If you have been putting off learning about investing and setting any money aside, the discipline of a club could be ideal. Many people join a club to have a group that they can talk to about investing and apply what they learn to their own portfolios. If you have $20-$50 a month to set aside and invest through a club, you might find membership is for you.
Even experienced investors use a club to gain information about stocks that they do not have the time to research. Many hands make light work. All members benefit from the work of other members. Work? Yes you need to contribute more that cash. Don't think that you can take a free ride. The pooled account may not be significant when compared to your 401(k) but everyone has a stake and needs to commit.
How Do These Things Start?
Groups of friends, neighbors or co-workers start talking about investing and find that a starting an investment club is the next step. Setting up a club takes some work but the National Association of Investors Corporation (NAIC) has all the information you need to get started.
How Do They Work
Successful investment clubs focus on learning as well as investing. Guest speakers, like a local broker or investment analyst, may be invited from time to time. Most people join a club to explore new ideas and discuss investing issues. In the early sessions of a club's life, education might be very introductory, covering how to read a balance sheet, an earnings report and the club's financials. Soon the club might be learning new ways to value stocks or discussing a book about Warren Buffett.
Clubs Are Work: Why Not Try a Money-Free Club?
Many clubs have fallen by the wayside when members realize that the time involved is significant. Often the treasurer feels this first. Because of this, groups that want to get started but are a bit intimidated at the paperwork, try a "money-free" club.
Some money-free clubs will focus on education only. Others will set up fantasy portfolios on a web site and buy and sell and do all the work, but with no real money in.
Advantages
• No monthly contributions.
• No need for a treasurer.
• No accounts to keep and taxes to pay.
• Great for people who are hesitant to commit to a regular club.
Disadvantages
• People often lose their discipline if they're not bound together by pooled money.
• Often people take a money-free club less seriously.
• It's less fun and exciting for some people, if there's no real money involved.
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