Articles - Archived Expert Advice
(Copy and paste the text into your document)Investment Clubs
Despite stock market inconsistencies, I am interested in starting an investment club. What are some fundamental steps the investment club should keep in perspective?
It's exciting to hear you are taking advantage of the market by investing your time and resources with others. Investment clubs can serve as a great introduction to the stock market, while encouraging members to build wealth through long-term investment strategies. Most clubs consist of like-minded people who are interested in investing in a specific stock market sector or the general stock market.
Often, investment clubs find that poor member selection or get-rich-quick mentalities tend to steer the group off course. The first fundamental step is to set clear investment objectives. The club should reference these objectives when making informed decisions on how and when to buy and sell stock. As a club, every member should agree that without a solid analysis, no stock(s) will be purchased or sold. This further discourages individual motives and exposure to uncalculated risks.
The next step is to promote consistent investing. As a group, you should agree on the monthly contribution from each member. Consider starting with a reasonable amount, say $25, and increase contributions on an annual basis to encourage members to stay the course. When starting out, it is common for a club to experience investment losses and/or small gains. Don't be discouraged, as this is the result of learning how to invest together.
Other fundamental steps include diversifying to minimize investment risk and reinvesting earnings. Just think, a group of 10 investors who purchased stock in a company over the course of five years could reap the benefit of doubling their original investment simply by reinvesting club earnings.
I commend you for taking advantage of growth opportunities in the stock market. Should your club need specific investment advice, consider speaking with a licensed broker or certified investment adviser. We look forward to hearing about the club's progress!
