Hey readers would you be open to starting an investment club with 15 people or would you be scared and run for the hills? Investments clubs have been around for a long time and it is primarily done to pool together assets to build the assets faster and in an intelligent manner. How can you say smarter because nobody actually wins in the game of the stock market? Well for starters if you are in an investment club, the members tend to have talks at least once a month to discuss the pros and cons of possible future investments the club will make. I think when people sit down and discuss finances in a responsible manner and make educated decisions then it all contributes to making better financial decisions.
Now to tackle the faster part of the process, if you have 15 people contributing 50 dollars a month for a year the sum total after 1 year is $9,000 of investable dollars being put to work for the club. Do this for 10 years with compound interest and the club will have upwards of 120 thousand dollars of compounding power every day. Little pennies turn into big quarters which turn into huge dollars. How long will it take you to save up 120K by yourself?
The one negative I see with this opportunity is at what point can members start to see the rewards of their invested dollars? If every member starts to take distributions from the club then the fund will not grow unless there is a plan in place to continue to contribute either new money or a portion of the distributions. For example if every member is owed 100 dollars a month for interest payments, maybe 15% can be held before releasing the money in order to grow the fund. Because if you equally distribute all the profits of the fund the fund will stay stagnate and will not increase to keep up with inflation plus the purchasing power of money. Getting everyone to agree on investing opportunities might be a difficult task as well. But the point of the investment club is to invest mutually to pool resources together in order to reap plenty of rewards at some point. After 10 years each member has equally invested about 6 thousand dollars towards the club. So I imagine people would want a good return on their money.
I see many positives with doing an investment club, but one that really sticks out is the availability of online tools (A Couple mentioned below). In addition to that you can also find bookkeeping software for investment clubs. These two tools will provide a ton of great information in order for the club to succeed. On one hand the club will get investment advice and analysis very easily, and on the other the club will handle the books for accounting purposes very easy. If things are automated then it makes life that much simpler for the group.
Typical Investment Club Structure:
President – Signing Authority for all Transactions / Investment Advice / Leads the Meetings
Vice President – Secondary Authority-Fill in for President / Finds Meeting Location
Treasurer – Maintains the Books / Signing Authority
Secretary – Communicates all Information to all Members
Tax Advisor – Handles the Tax implications for the Club
Financial Advisor – Monitors the Investment Markets to Find Deals
Resources:
http://en.wikipedia.org/wiki/
http://www.fool.com/
Join an Investing Club Association:
http://www.betterinvesting.
Investing Advice Website:
http://www.dividend.com/ (169 Dollars Annually Fee)
This is the information you will need to start an Investment club.
Comment if you are a part of a club like this or if you will ever consider starting an investment club?
Rich Uncle EL
Have to agree, this sounds like a great idea, even though I'm not entirely sold on it yet. It would definitely have to be a group of individuals I trust (can't be just anyone). Great post, RichUncleEL!
Trust is a hard thing to achieve, and it complicates things when money is involved. As long as decisions are made by at least 3 people and the club is protected by legal paperwork, I don’t see a big concern.
Taking investment advice from a friend or associate can be a costly mistake because they may not understand the fundamental risk and value of an investment, causing them to overestimate what its worth.