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What To Expect From An Investment Club

I haven’t had what you would call the best track record when it comes to picking individual stocks to invest in on the stock market. I don’t want to sugarcoat it, but I’m terrible at it and that’s all there is to say! But at the same time I can’t just throw in the towel and not invest in anything because I’ve got my retirement to think of. So what other options do I have?

One option that many people turn to is the investment club. These things are usually groups of people that have banded together and pooled their money in order to make investment decisions as a group in the hope that they will do better than if they had invested individually.

I’ve seen some interesting figures in recent years that show that most investment clubs double their money within five years which makes them better off than most major mutual funds. I don’t know how much I trust that statistic, but even if it’s sort of true then investing in an investment club may be just the thing for you.

So what should you expect from an investment club? Well for one thing you must realize that they are not professional entities, they’re not run by professional investors; they are run by people just like you. The group itself will determine what to invest in and vote on it.

But what can you expect from the club itself. Each club should be run like a business in that they have regular meetings with agendas and officers. Usually individual members will be assigned different companies to research and every investment club will have their own process for research that they will explain to you. You will probably be expected to write a report about your specific research and present it to the club so that they can determine whether or not to invest in that specific company.

Once the club has discussed your research (and the research of others) in great depth, you can expect them to vote on whether or not to invest in the company and you can also expect no action to be taken unless a vote of the majority rule has been reached.

Many investment clubs are closed to new members until somebody else leaves the club. A good size for an investment club is between 10 to 20 people because much more than that and it becomes difficult from an administrative point of view because somebody in the club has got to keep records and create reports that show the clubs investments and how well they are doing at any given time.

The more people that are in the club, the more difficult it becomes to create the paperwork needed… so it all comes down to the logistics of the thing which means that clubs should be prepared to stay small.

Of course if you’re not happy with your current investment club, you can always start your own club and this can be done quite easily with just a few members and a few dollars each to invest.

However your club is run, the important thing is to simply join to begin with. Pooled money and pooled research tends to bring about higher returns and really that’s all we’re interested in, am I right?

Written By Jason Markum

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