How to Setup A New Investment Club
There are a few general and commonsense rules to follow to ensure a successful start and outcome for a new Investment Club. Usually a club will start with a group of friends and family and it is important to outline to all members what is involved and what the club guidelines are and to ensure that all members participate in the creation of the club structure and have input to decisions.
One of the biggest mistakes that a lot of new club founders make is that they do not tell the club members upfront that they may lose money with the trades that they make in the beginning. Not every trade that the club will make will be a winner, and this is especially true during the first few months of the club. Since many of the investment clubs which are created do not have many members who are familiar with making stock trades, it is a learning process for the majority of the club members. It is essential to inform potential members before they join that the money they put up for investment should be money that they can stand to lose, and not suffer any hardship because of the loss. This being a general rule for all investment with any risk.
In discussing money, it is necessary to make sure everyone agrees upon what the contribution will be for each member on a monthly basis. The amount of the monthly contribution should not be more than what any one member can afford to put in monthly. If all of your members but one can afford to put $100 into the club account, and the one can only put $75 into the club account monthly, then everyone should only put $75 into the club account. Then all members are on an equal footing. All monthly contributions must be equal to sustain the equality of the group and its integrity. The most common monthly contribution amount used for investment groups is $20 per month, but each group decides the parameters for the club.
Make the club official by drawing up a partnership agreement and have everyone who wants to be a member of the club sign the agreement. It is crucial to the success of the club for everyone to know what is expected of each individual, and the group as a whole. By having a signed membership agreement and a copy given to each member, potential disagreements can be largely avoided.
Do not try to start with 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 the group to work as a team, requires a team of a manageable level of no more than fifteen. Most investment clubs do not exceed 10 members.
Starting your own investment club should not be something which makes you nervous or causes undue concerns. Concentrate on starting with people you know and trust and create a group that can get together and have fun, and you will see that your club will be a huge success, with lots of learning and lots of enjoyment.
Finding the perfect members for an Investment Club –
After the decision to start an Investment Club, the next step is to get together a cohesive group of people as members. Without members, there is no club! It is beneficial if the members know each other, and it is also important to have a group of people who get along with one another.
People who are going to fuss and argue every time you hold a club meeting will be best avoided. By picking wisely, you will have club members who can agree easily with one another which is a crucial element in a successful club.
When a club is just beginning, it is an option to advertise for members if necessary, but once the club has actually been formed, then to add new members later would be done by member referrals only. It is also possible to find initial members online by going to certain investment web sites which allow you
to post messages stating that you are interested in starting an investment club.
Also, when starting a group, an important criteria is to you recruit members with similar financial goals so that the group unity is not threatened by arguments later about the direction in which the group needs to go. It is wise to get members who all can agree on a certain amount to be invested on a monthly basis. Since all profits will be split equally, it is only fair that everyone contribute the exact same amount of investment cash every month.
The members chosen to recruit should be easily able to contribute the agreed upon monthly contribution. They should also be able to do their part of the research which is required in being a member of an investment club. Arguments will ensue if any members are not pulling their weight doing the research or making the monthly contribution.
Some people choose not to use family or friends when starting their investment group. This is because they do not want to mix their money with their family relationships and friendships. If there is doubt about getting along with family members or close friends when it comes to dealing in money matters, then it may be a better option to not include them in the investment club.
Once the members and the agreement are organised, it is essential to start setting the goals for the group. The investment club will be ready to start market research and create reports of promising companies to consider for investment.
Do you feel ready for the commitment of starting an investment club?