Tips for Starting Your Own Successful Investment Club
Starting your own investment club should be a venture that ultimately relieves you of some of the worries of conventional investing on your own. A very good way to start is to begin with your family and friends which should be a group with whom you get along easily. Decide what kind of an Investment Club you want whether it is a Stock Market Investment Club, Real Estate Investment Club, or other kind. If you just follow a few general and common sense rules from the beginning, you should be able to establish a very successful club.
Full disclosure to all participants and members should be the very first rule you adopt for your new club. And the very first disclosure should be that it is possible for members of the club to lose money in the venture. It is likely that not every trade or investment will make money or hit a home run. This may be especially true in the beginning as the club develops its feel for where they want to invest. Unless you start with some members who are experienced in investing, and especially club investing, it will be a learn as you go experience for the members of your club. As you increase the membership, you may be able to gain valuable investing knowledge from new members who bring experience to the table. But again, make sure that all members are aware that they could potentially lose some or all of the money that they invest and they should not be using money that they cannot afford to lose and cause them hardship as a result.
Next you should establish is the initial contribution for new members and the monthly contribution going forward, for the members. This amount for the monthly membership should not be more than what any one member can afford to contribute. If you suggest that $100 would be the best for the monthly contribution, but one of the members can only afford $75, then everyone should adopt $75 as the monthly amount. It is important that all monthly contributions are equal to maintain equality among all of the members and make it easy to determine profit distributions. The most common contribution amount we have found is around $20 - $25 a month for all members. This can still add up to a sizeable amount if you have a large membership. But keep in mind that it always possible for the club to mutually agree to raise or lower the amount of the monthly dues at any time.
Next on your "To Do List" of things to set up your club is to draw up a formal partnership agreement. This should be an actual binding contract or agreement to which all members must sign and agree. The success and failure of the club relies on each member knowing just what is expected of each individual, and of the group as a whole. This agreement should set forth the Capital Contributions, Capital Distributions; establish the meetings schedule, accounting procedures, bank accounts etc. Each member, by agreeing and signing the document, will be given a copy and thereby know just what and how they and the club are expected to operate.
Perhaps the best form of Partnership Agreement may also be to set up a corporation or LLC. While many partnerships start out with the best of intentions, disagreements are sometimes inevitable. Further, if one member of the partnership is sued, it is conceivable that the entire partnership can become party to the suit and potentially lose everything. A corporation or partnership will limit the exposure of the partnership. Also, for a new club the amount of money actually invested in the club may not warrant a corporate structure at least at first. But as the assets of club the begin to grow, a corporate structure should be considered.
You should probably limit the size of your club initially. Don't try to start a large investment group. Having too many members can cause many problems, such as a greater risk for arguments and fragmentation of the group. For your group to work as a team, you need to keep your team to a manageable level of no more than fifteen. Most investment clubs do not exceed 10 members.
One of the great things about forming your own investing club is that it should allow you to invest your money with fewer worries. Trying to invest on your own can be wrought with mistakes, losses, and concerns that are minimized when you tap in to the knowledge and abilities of others. Focus on starting your club with people that you know and trust and in so doing create an atmosphere that is fun. Make it something to look forward to each month and your club will be a financial success. |
