• Home
• About
• Contact
• Future Value
• Stock Quote

How to Start a Stock Trading Investment Club

Posted on August 23, 2010 by StockTrading.net | No Comments

If you’re new to stock trading, you might enjoy being part of an investment club.  Starting a stock investment club is a great way to learn more about stock trading, and it also provides an excuse for socializing with friends on a regular basis.  Investing and trading as a group means you’ll pay lower transaction fees because your purchases as a group are larger than what you can do individually for most people, and you have access to more investment options with the larger buying power.  Here’s some information for starting your own investment club:

Invite Friends and Family

Talk to your co-workers, friends and family to see if anyone you know is interested in joining an investment club.  Choose the size of your trading club, ideally between six and twenty members.  If you don’t find enough interest among people you already know, consider placing an ad in the local paper or on Craigslist.org for investment club members.

Create and Establish Club Rules

All clubs need guidelines and rules, and a club dealing with finances cannot operate without them.  Consider how much each member of your stock trading club will contribute and how often, what each person’s research responsibilities will be, and how taxes and administration of the club will be handled.  How will investments be chosen?  How will earnings be distributed or will they all be re-invested in new stock– and for how long?

Establish Goals for Your Investment Club

An investment club is about learning how to trade stocks and educating yourself about the stock market in a fun setting.  If you want the club to have specific goals for profits, you should set this at the first meeting, so everyone can work toward the same goal.  Do you want to double your money every 5 years?  Whatever your group goal, be sure to write it down.

Long Term Approach to Investing

If you read about other investment clubs, you’ll find most report success when they participate for a long period of time rather than short-term investments.  You’ll want to decide on how to evaluate stock purchases, if you’ll invest all the time regardless of market conditions (which is said to lower your risk due to dollar-cost averaging), how to handle earnings and re-investments, which types of stocks to invest in, how to diversify, and how long the club will remain in operation.

In your operations and policies statement that you should draw up for all group members, you will want to decide how to handle the situation if someone decides to quit the investment club before the agreed-upon investment time has ended.  Ideally, each member will be committed for the long haul, but you want to have a pre-agreed upon plan in place in case that isn’t possible.

Time Commitment of Members

At your first meeting, discuss the time commitment expectations for each member.  Will your club operate for 5 years or 10 years?  Will you invest 3 hours a week researching stocks or 3 hours a month?  Each person should agree to carry their own weight in the club, and contribute the same amount of information to improve the success rate of the stock trading group.

Photo via Lars Plougmann

Comments

Get a Stock Quote