What are Investment clubs?
Investment clubs are created by people who want to pool their funds together to make a collective investment and would also like to gain knowledge on the different types of viable investment opportunities available in the market. Each member of the club periodically contributes an agreed amount of money to purchase growth stocks through a dollar-cost averaging approach.
Stock Dividends
The dividends, as well as the capital gains, are usually reinvested to gain more interest. The club members vote upon the security purchases. This is also one way of decreasing the personal risk of club members. There are also investment clubs that allow non-club investors to participate in more significant investments of the club, provided that the non-member investors receive a much lower share of commissions.
Role of investment clubs
Also, it is also the role of investment clubs to help their club members in becoming more knowledgeable in all factors of investments. The National Association of Investors Corporation (NAIC) is a well-known trade group for an investment club. This non-profit organization provides guidance and imparts investment knowledge as part of its membership.
Benefits of Investment Clubs
A good choice of investment clubs is those that have already been around for many decades and have a track record of continuously increasing interest in the stock market. By joining an investment club, small investors can increase their buying power, share their collective knowledge and socialize while earning from their investment. Another benefit derived from investment clubs is that investors are not expected to invest a great deal of money but still will be able to receive a more significant amount of interest, which is usually possible if you have similarly invested big lump money.
Working
A typical investment club usually meets once a month, and members are given individual responsibility of researching investments and then sharing their ideas with the other members of the club. Likewise, these meetings also served as an occasion for members to contribute to their monetary fund, which is intended to purchase stocks, mutual funds, and other types of feasible investments.
Objectives
One of the main goals and objectives of an investment club is the opportunity to learn. Therefore, most investment clubs spend a great deal of effort and time on research since they believe that a well-researched investment plan has a much greater chance of success. This is also why risk is minimized when joining an investment club.
Starting an investment club is not that difficult and requires no special knowledge. A group of friends or even co-workers can decide to set up an investment club. This is usually an excellent place to start as you will know the people you are dealing with.