How to start an investment club from start to finish. We had our monthly investment club meeting this week. We formed the club about five years ago and have come a long way. If you are interested in starting a club of your own, here’s some of the information from the handout at our first meeting to get you started.
Philosophy and goals (Rules and Expectations)
Use the Official Guide from the NAIC: Starting and Running a Profitable Investment Club [1] by Thomas E. O’hara and Kenneth S. Janke. This book provided the framework for getting our club started. It was very helpful to teach us the skills we wanted everyone to learn and how to run our club. We focused on the chapters on Investment Philosophy and Security Analysis first, but covered them all eventually.
We joined the National Association of Investment Clubs (NAIC) at first, but are no longer members. It included educational seminars and opportunities through out local chapter that were beneficial in the beginning.
Goals of Investment Club
- Double our money every 5 yrs (14.9% CAGR)
- Education, learning and participation
Principles
- Evaluate stocks based on NAIC stock selection guide method.
- Invest regardless of market conditions. (Dollar-cost averaging)
- Reinvest all earnings.
- Invest in growth companies.
- Diversify to reduce risk.
Long term Approach. A short-term, speculative approach to investing has not been successful. Investment clubs that have had a long-term investment outlook have done well. However, because of the learning curve and initial expenses, clubs may lose money at first. See our investment club portfolio and returns [2].
Responsibility. All club members will investigate and analyze stocks and make periodic reports.
Time commitment. During the first year, three or four hours a month will be needed. It will go down to about an hour of preparation after the evaluation techniques are learned.
Club business
- Discuss Operations and Adopt Bylaws [3]
- Decide Amount of Monthly Deposit
- Elect Officers
- Individual Assignments:
- Prepare a report of a corporation on the NAIC Stock Check List. (ch. 7)
- Prepare a report on the same corporation on the NAIC Stock Selection Guide. (ch 8-10)
- Treasurer Assignments:
- Obtain tax ID number
- Open brokerage [4] and checking account
Helpful Internet Resources
- NAIC site [5]
- Local Chapters [6]
- Software: Bivio [7]
- Broker: Scottrade [8]
- SSG tutorial: Investment-Clubs [9]
- Tools: IClub [10]
- Stock data: Stock Central [11]