Why start or join an investment club? There are basically three reasons to join an investment club. education, fun, and potential financial gain. The club hopes to do well and make profits; however, financial gains are not guaranteed. Clubs provide a social atmosphere that makes learning about investing fun. Investment clubs differ from other clubs, however, in that individuals are not merely members of the club but are "partners."

Typically, there are 10 to 20 partners in a club. Partnership agreement forms are filed and guidelines are established for the club. Guidelines include how much and how often partners must pay fees to the club and how to withdraw funds paid in and profits made. Guidelines are also set for the order of business at each meeting. A typical club meeting will have an update from the treasurer, an educational program, a presentation by partners presenting stocks or investments to buy, and updates from partners who are "watching" the club's current investments.

Advantages of an Investment Club

You can learn from others who have been investing longer.

You are pooling money and making joint decisions.

This joint effort may be very comforting if you. re hesitant about making investment decisions on your own.

Clubs require "dues" in the form of a set payment. These payments, typically $25 to $100 a month, are used by the club to buy stocks, bonds, and other investments. Regular payments such as monthly dues may make it easier for you to set aside money for investments. Like paying a bill each month, you. ll write a check to the club for investing. The clubs function as a learning environment with partners taking turns giving educational programs and presenting stocks or other investments to study and to consider for purchase.

Disadvantages of an Investment Club

There are also some disadvantages to investment clubs. Financial decisions must be made year-round. For that reason, investment clubs differ from many clubs in that they must meet throughout the year. The stock market closes for only a few national holidays and certainly doesn. t take an extended summer vacation. These clubs require a commitment by partners to attend meetings, hold offices such as president, secretary, and treasurer, and present educational programs. Just like any group of individuals, you may not always agree. Many clubs decide what to buy and sell with a simple vote, with the majority ruling. If you join a club, be prepared to accept decisions made by the majority of the partners even if you disagree with the investment decision.

Each investment club will establish procedures for operations such as how often to meet and where, how much dues to charge, how new partners join, the minimum time to stay in the club, and how to pay out partners who must leave the club. Clubs must also establish criteria for investments and decide how to diversify the portfolio. The club will decide if a portion of their club. s investments will be speculative or somewhat risky in nature, conservative, or growth or income oriented. Clubs may also set a policy as to what portion of the investments will be in stocks, mutual funds, or bonds, as well as set criteria for buying and for selling. Most clubs, however, know that regardless of general market conditions, funds will be fully invested, and not held in cash.