Things to Know before Starting an Investment Club
One of the most exciting social events that you could ever put together is an investment
club. These groups not only give you and some of your friends a chance to get together, it
also gives the members the opportunity to learn how to play the stock market game and
earn a little extra cash while doing it. Although I highly recommend that anyone who is
interested in forming one of these groups do it, there are a few things that must be
considered and accounted for before doing so.
A primary concern for your club is the people you invite to join. You must absolutely be
sure to get only people who are serious about the club, and that they can get along with
one another. If you have friends who do not seem to be able to get along together, by all
means leave one of them out of the invitations to join. If you begin your club with just
one agitator, it will be enough to destroy the group, so be very picky in recruiting your
group members.
Once you have your members, let them all have a voice in the creation of your group’s
operating agreement. This way, everyone will have a say right from the beginning and
nothing should be said about how things will be run at a later date. Take care of things
like the rules, meeting place and the contribution amount, and have everyone in
agreement. Then give everyone a copy of the agreement before they leave.
Set forth in writing also that each member agrees to being informed that the investment
club may not be profitable for a few years, if it is profitable at all. Let them know that the
money they agree to put in each month is money they very well may lose, and that they
acknowledge this fact. For some reason, some people believe that they will be making
money immediately, and when they lose it instead, they get angry at the group. A signed
letter of acknowledgement gets this problem out of the way from the very start.
Another part you may want to put into writing is that each member will be responsible for
their own taxes, and that the group as a business is not liable for the reporting of any
profits made, or losses sustained during the year.
Your investment club will be a positive experience if you and your group members stay
organized with all of your paperwork, and work together as a whole to learn and
understand how the stock market works and how to pick a winning stock. You are a tram,
and should divide up the work as such. With everyone working together, it can’t be
anything less than enjoyable.
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