Investment Clubs: An Overview
I'll never forget the fun, lovable characters from the Baby-sitters Club book series. Kristy, Claudia, Stacy—we all had a favorite. If you’re not familiar with the series, what those witty adolescents did was form a club of babysitters. Then they capitalized upon each others' strengths to help them make it through the trials and tribulations of three things: being a teenager, being a babysitter, and making money.
Even though we’re all grown up, we can still learn a lot from those characters. One way to profit from what they taught us is to transfer the principals over to an investment club. Instead of talking about boys and children—okay, in addition to talking about those things, why not talk about investment options?
What is an Investment Club?
An investment club is a group of friends who meet and discuss things like companies, stocks, real estate, and markets. Yet, it’s usually all done in a very fun, friendly manner (uncomfortable office chairs not required).
People talk about the stocks they are considering investing in and why. Then the group discusses the pros and cons of each of the investment ideas. Once everyone is in agreement, those investment options become the club’s picks. Everyone then pools their money together to invest in those picks.
Investment clubs are kind of like mutual funds, except you get to have more control. A mutual fund uses a qualified financial investor to make all the picks. Why not tap into each club member’s strengths to get the same thing done for less? Some of us like the idea of having others to bounce ideas off of and greater funds to invest with, but don’t necessarily relish the idea of giving up so much decision-making power. The clubs offer a happy medium.
Grow Together Financially and Intellectually
Research has shown that investment clubs who focus on learning are much more successful than those that do not. It’s important for the clubs to pool the knowledge, not just the funds, of its members.
Investment clubs generally meet once a month, and it has become tradition at many meetings to include things like guest speakers and book reviews. Perhaps you follow a helpful investment blog (like this one); why not share that with the other club members?
Investing is a risk-reward adventure, and it’s comforting to have others to share the inherent ups and downs involved. Everyone who invests in the stock market has worries and hopes, but to be able to share those with familiar and understanding faces around you once a month can be very comforting.
Investment clubs help us capitalize on the strengths of others while finding a way to support and mend weaknesses as well. They’re just like a babysitter’s club for grown-ups.
Dear Boys: KEEP OUT!
Unlike clubs when we were children, we do not necessarily have to make it an all-girls or all-boys club. We’re all adults here, and we may not mind co-ed clubs anymore. On the same token, however, if you’re a woman and investing feels very much like a “man’s domain” to you, a women’s investment club may be the perfect way to help you get your feet wet with investing.
We'll be going into more detail on how to join or organize an investment club and how to get the most out of them, but for now you can start thinking about whether one might make sense for you. They can provide a supportive environment to help build your confidence about investing.
Have you ever been in an investment club? Leave us a comment with your thoughts on them.
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Ian Brennan wrote:
Tue, 02/15/2011 - 15:47 Comment #: 1When I was doing research on starting an investment club I found "Chicks Laying Nest Eggs" by Karin Housley in the local public library. While I wouldn't necessarily follow her advice on how to select companies to invest in, I do recommend the book to people wanting to set up their own club. This book does require one to maintain a sense of humour, but I think she makes her point that clubs can, and should be fun and educational. Since there are as many investment styles as there are people, how and what to invest in depends on the actual members. Don't expect to make a lot of money in the first couple of years, but think of it as money spent on gaining a financial education. For that reason, I recommend starting with Exchange Traded Funds, before putting money into individual stocks. If you are not happy with one club, try a different one, or why not start one with some friends!
MoneyCone wrote:
Wed, 02/16/2011 - 19:49 Comment #: 2I haven't been in an investing club, but sounds like a swell idea! Since both your money and your peers' money's involved you won't make hasty decisions.
I might gamble with my money but would dread it if I was responsible for someone else's investment.
Jessica Schmeidler wrote:
Thu, 02/17/2011 - 02:44 Comment #: 3I'm glad you both liked the post.
I'll have to check at the book you mentioned, Ian. Thanks for all the additional information you added. :)
MoneyCone, I'm completely on that one. My money is one thing, and it's important enough, but I would utterly devastated to feel I was responsible for the loss of someone else's.
Everything You Need to Know about Stocks | MomVesting wrote:
Thu, 01/19/2012 - 21:47 Comment #: 4[...] You don't have to be an expert or try to go it alone. You can get involved with an investment club for encouragement. [...]