WHAT IS AN INVESTMENT CLUB?
An investment club is formed by a group of like-minded individuals who have come together for the purpose of pooling money to make joint investments. If you are interested in investing and you don’t want to do it alone, you may join an investment club or start one yourself.
TIPS FOR STARTING A SUCCESSFUL INVESTMENT CLUB
Thinking of setting up an investment club? Then here are some tips for you to consider:
- All members must understand the risks of investment. Many people who invest always believe they will be very successful at the end of the day, they may not even be prepared to lose their money or investment fund. Members must understand that every business comes with its own risks, and everyone must be prepared to invest money they are willing to lose.
- Find like-minded people who share similar investment objectives or goals. Things become easier and smoother when you are dealing with the right kind of people. To get investors, discuss with family members, friends, colleagues and other associates to know if they are interested in starting or joining an investment club. Having members with diverse expertise and experiences will be of great benefit to the investment club.
- There should be a formal structure. Since it is money we are dealing with here, things may go out of hand if not handled well; to this regard, a formal structure which clearly defines the role and responsibility of every member should be put in place. Every member is expected to play his role well and also participate in the realization of group objectives and goals.
- There should be a formal agreement. Make sure members agree on this, or any other rules as the case may be. This will help to protect individual members in case things begin to go out of hand.
- Members must define how often they will be meeting; ideally, there should be monthly meetings by club members to make important investment decisions, and also to discuss investment progress and other financial records and cash balances. If members fail to have regular meetings, and the group becomes disorganized, it is very likely that the investment club will not survive. So don’t overlook the importance of regular meetings in investment clubs.
- All members must agree to make monthly contributions. Aside from the initial members’ lump sum contributions for investment purposes, members should endeavour to make monthly contributions. Ideally, this should be reasonable so that no member is hard pressed. Contributions should also be flexible such that members who wish to contribute a greater amount can also do so. Profit sharing should be proportional to contributions made. All these should be clearly worked out.
- Education is one of the main goals of an investment club. An investment club made up of educated investors with great expertise will be more successful than one which is just focused on profit-making. An investment club should encourage the sharing of ideas, knowledge and experience among its members. This will become rewarding in the long run.
- Think Long Term: A typical investment clubs are not usually a get-rich-quick scheme. It may not be suitable for people who want short-term investment rewards. So if you are looking for quick investment returns or profits, look out for other opportunities, and not an investment club. When forming an investment club, it is better to look for members that have an interest in long-term investing. Too Many Members Not Needed: For an investment club to be successful, you must start with a few investors. It’s easier to come to an agreement when few people are involved than when you are dealing with a great number of people. Start with a small number of people; new members may join the line when the structure is already firm and well established. A membership of 10 investors or a little more is just ok for an investment club. If members are too few, this will result in a lack of funds to invest.
Now you have several tips on how to start your own investment club. Waste no time taking action. It can be a lot of fun and profitable if done well. Cheers and good luck!
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