Starting an Investment Club

Investment clubs have been around for decades, but they are gaining popularity as a way to prepare for retirement. The concept is simple. A small number of people joins together to form a group with the purpose of using pooled money to buy stocks, bonds, or even real estate. The rise in property values has made starting a real estate investment club a more suitable choice for many hoping to earn money by pooling resources.

The members share the assets and liabilities of the investment club, which makes learning how to start an investment club a task to be taken seriously. The members have the chance to gain significant financial returns from these investments. Starting an investment group means addressing some potentially serious issues, however. These considerations are key to any investment start-up.

Set Investment Club Rules Regarding Number of Members

Most groups start with 10 to 20 members. Some consider couples a single member with one vote while others require each individual to be a member. Expect that people will come and go from the group and write into your by-laws the maximum number of members you will permit and the minimum before dissolving the club.

Participation Requirements When Organizing An Investment Club

Some investment clubs meet monthly and require each member to be present while others allow remote participation. Consider potential penalties for people who do not participate. It is not uncommon for groups to oust members after a certain periods of inactivity or to charge them a penalty. An investment club works because of equal participation.

Without participation, the active members put in more work for the same share. In a real estate investment club, decide who will handle issues related to the maintenance of the property. For flipping investment groups, determine how many hours each person will put into the property.

Online investment clubs are growing. These investment clubs may use private forums or email as a way to stay in contact. Setting participation requirements for members of an online investment club holds more significance since the members are not face to face.

Delinquencies and Withdrawals As Part of Investment Club Rules

A member may at some point be unable to contribute the agreed-upon amount. While kicking that member out immediately sounds tempting, the process can get complicated. The group’s financial portfolio depends on everyone’s participation. Decide what level of delinquency will force a member’s removal and how you will handle paying that member’s share of current assets.

Members use investment clubs as a way to put away money for major life expenses, such as houses or college. Work on how much and how often you will permit members to take their portion of the money. Also consider setting limits on the shortest-term investment you will permit.

Deciding Leaders When Organizing An Investment Club

Although the members of the investment club each have a say in the purchases, someone has to do the legwork involved in those decisions. A governing board or a rotating set of officers works well. When learning how to start an investment club, consider various options for choosing leaders. With rotating officers, everyone gets a say in the decision, but the annual treasurer will make the purchases, for example. The president will call all meetings and set the agenda. By rotating these duties, each person participates equally in the administrative work.

These decisions only scratch the surface of issues to consider when starting an investment club, but they represent the issues likely to cause conflict. Write by-laws and get these issues settled while everyone is still excited about the financial prospects.

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