An investment club is not for the get-rich-quick at heart, but for the individuals who want to be financially better in 5-10 years, depending on the club’s long term objectives. An investment club is also not a merry-go-round initiative.
The overall objective of an investment club is to make money using a pool of equal member-contributions.
When establishing an investment club, one of the most important things for the group to decide is its purpose. Without a purpose, there will be as many objectives as there are members.
Whatever the objective, the members should discuss guidelines to selecting and making wise investments, to avoid particular people driving in their personal objectives into the club. For example, investing in the stock market is a long-term proposition and one that should not be taken lightly .
Discuss, agree and document minimum number of members needed at each meeting to make a decision.
At the earliest time possible, the group should establish several ground rules on which to run the club.
Discuss and decide how it will operate - it is best advised that you get registered at some time. Without being registered, it may limit the club’s investment opportunities and/or force the group to conduct their transactions using a person’s name.
With registration, the members need to agree to their club name, which will be used to register the club either as a partnership or social club. Assign a committee to develop the potential club agreement then, review it with members.
This will force you (members) to make decisions that will help the club function well in the future. Matters such as entry requirements for new members or conditions that must be met before a member can officially pull away from a club, could make or break it if dealt with them as they arise.
By all means, let the members sign to an agreed partnership document. In most cases a lawyer will be necessary to finalize the legal partnership agreement.
Having done this, the members can discuss and agree to finer details such as monthly meetings date and place, minimum periodical individual contribution, and penalties if any. Finding a time that works for everyone can be a real challenge, but attendance is important.
Because investment clubs encourage you to invest regularly and knowledgeably, and to understand the various risks associated with investing, they add on your individual financial intelligence that you could use as a family.
