Starting an Investment Club

There are two different types of investment clubs- one that allows you to "practice" investing with simulated purchases of stocks and investments with pretend money, and another that actually invests real money from a group of people who select the stocks together to increase their potential for profit, as well as enable the members to develop a more complete investment porftolio than they would be able to do on their own. Most investments clubs that pool real money together for investing will generate a legal partnership in order to protect group members investment from other club members.

If the idea of investing still causes you to shiver with fear- an investment club that operates with pretend money is a terrific opportunity to learn more about investments and without the stress of losing your hard earned money. It's a safe and comfortable venue to learn about investing before you make the commitment to put your real cash into the market.

Advantages of Investment Clubs

There are numerous reasons why individuals might decide to join or start their own investment club. The reasons include advantages over investing individually, and include:

Diversification
Education
Socializing

Everyone who is considering investing or has money invested already understands that it is important to develop what is called a "complete portfolio" or a diversified portfolio. Single investors rarely have enough money just starting out to buy enough shares of stocks in different areas to create a diversified portfolio. By pooling money with a group of people, you build up your investments quickly and can grow a very diversified, complete portfolio for maximum returns.

Consider an investment club of just 5 members. If each person is contributing $10 each month, you have $50 a month to invest. A larger group of 10 members with a small contribution would result in $100 to invest monthly. Alternatively, you can keep your group small, and maybe increase the group member investment to a reasonable $25 per person each month, and watch your portfolio grow over the long term.

Education is another great advantage of an investment club. Whenever there are multiple people working towards a single goal (increasing wealth), you automatically have an increased knowledge base at your disposal. Most people don't have formal education regarding how to invest or purchase stocks, so the combined knowledge of each member is very valuable and will likely result in better selection of investments and improved earnings over what you could do on your own.

Socializing is an often overlooked advantage of an investment club. Anytime you have reason to meet with a group of friends and talk about something everyone is interested in, it can turn out to be a very enjoyable get together. While your meetings need not be elaborate, you can gather at someone's home and share snacks and include a few drinks while you discuss your investment strategies.

When to Start an Investment Club

If there aren't any investment clubs in your area accepting new members, you should consider starting your own. The best time to be part of an investment club is when you are young- perhaps still in college, or just after graduation- as your investments will have a long time to turn a profit. However, even if those years are behind you, it's never too late to invest your money in areas that can earn you money. The trick is to find a group of individuals with similar investment goals to pool your money together and benefit from the strength in numbers!

There have been studies on investment clubs in comparison to individual investors. It was found that when individuals put their money together on a regular basis and invest together, the knowledge of each member helps select better performing investments than individuals who do it all on their own. What other reason do you need to start an investment club?