Starting Your Own Successful Investment Club - Helpful Tips
There are a few general and commonsense rules to follow to ensure a successful 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.
While we are discussing money, you need 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.
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