Are Investment Clubs For You?

Investment Clubs Haven't Gone Out Of Style

Baby boomers grew up hearing their parents talk about the time their investment club had a chance to invest in Xerox and turned it down, thinking that an idea like that couldn't possibly work. Missed opportunities aside, investment clubs haven't gone out of style. Just like parents in the 60's and 70's, savvy parents today find an investment club a good way to fund their children's college tuition.

The way an investment club works is that members pool their resources to buy various stocks they would otherwise not be able to afford. Members spend a great deal of time researching and discussing these stocks to make sure they get good returns on their investments. Investment clubs tend to run like social groups, in a democratic fashion but by like-minded people who hope to see their bank accounts grow. Most of the time, investment clubs have a president, a treasurer, and a spokesman. Members vote on the various stocks and bonds, deciding when and how much of a particular stock is to be bought. Interest rates are examined to see whether or not they are conducive to buying or selling, and which stocks are to be purchased.

Investment club officers decide which members will research a given stock. The research is done by various methods. For example, a group of members might visit a particular company or the members might choose to profile the stock market at a given time. Sometimes it's effective to examine the history of a particular stock to better understand its earning potential.

All of the members of an investment club have to participate in the purchase and selling of stocks, so that the club is considered active. Otherwise, the club would be considered a security and would need to register with the SEC. Club members contribute cash to the investment pot on a regular basis with varying amounts specified at certain intervals by the individual clubs. For example, one club might have members contributing $150.00 monthly, another club requiring more or less cash at shorter or longer intervals.

An Investment Club Might Be Just The Ticket

In general, if all your available free cash is tied up or promised to debts or bills, it's not wise for you to join an investment club since investment clubs tend to lose money in their infancy. On the other hand, if you can spare $25.00 a week, for instance, an investment club might be just the ticket to pay for your kid's orthodontia.