Start Investment Club - How do I Start an Investment Club?

How do I Start an Investment Club?

Perhaps normal membership in an investment club doesn't appeal to you as much as the thought of running one. Or maybe, just maybe, there are no clubs in your area and you want to change that as soon as possible. Never fear, however daunting the task may be, we're here to help with step-by-step advice. It's actually not that difficult to start an investment club. What's more, it's a fun way to learn about finances, and you can let your kids participate in -- or at least watch -- the excitement of increasing or decreasing group holdings.

Talk To Your Friends

If you speak to your friends and family who have an interest in the stock market, you may gain more membership. Just be careful not to let it interfere with your relationships, since major losses can be a strain.

Research The Laws

Before you do anything at all, you'll need to hit the books, so to speak. Research state and local laws regarding gatherings of people and, of course, investment in general. It is definitely a good idea to look in to federal laws as well, especially if you plan on having a large investment club, or if you or another individual member of your proposed investment club is worth $25 million or more in assets.

Write A Charter

A charter or a mission statement will outline clearly the group's goals, which you and your members should agree on before you even convene as an official investment club.

Be sure that everyone agrees with and signs your charter, which should include criteria for gaining new members, managing pay if there are significant investment gains, how frequently you meet, and how much each person's contribution should be. Be sure that you outline individual roles and limit the function of each role so that you can avoid the problem of one person having too much power. Mutiny in an investment club is not unheard of if the charter is not well-written, and these people can get away with loopholes in the contract.

Of course, make sure that you all sign it! This gives you an official record of original membership and makes it a binding document. You may even want to have the charter signature sheet notarized.

Finally...

Make sure that you register as a business. You can operate very simply as a Limited Partnership, which in taxes is represented as a single group. Speak with a CPA about attaching Schedule K to your taxes...so that an audit isn't in your immediate future!

Best of luck.

Getting Started