How to Form an Investment Club, Step By Step

By Selena Maranjian of The Motley Fool

Q. Can you offer any tips for people forming an investment club?

A. Sure. Start by gathering around six to 15 interested people. Begin by discussing your goals and expectations, making sure they’re compatible. Don’t actually form the club until you’re sure you’re all committed to it.

Agree on the amount of the monthly contribution per person, and where and when you’ll meet. Choose a name for your club, elect officers, and file for a Tax Identification Number via IRS Form SS-4 (which you can download from the IRS website).

Draft a partnership agreement and bylaws, then open a brokerage account. (Alternately, you might create a less-formal club, which learns and researches together, but doesn’t collectively invest money.)

Start meetings on time and stick to your agenda. If learning about investing is one of your club’s goals, you might elect an education officer to organize lessons for the group. Members can each read a book or article on investing or business and then report back to the group. Or distribute some required reading to be discussed at the following meeting.

One member might learn how to calculate some stock valuation ratios and then teach fellow club members. You can all go on a field trip to a local company or visit a local library together and ask the librarian to show you useful reference materials, such as Value Line stock reports.

Consider inviting some guest speakers, such as a veteran investor, a member of a more-experienced investment club, or someone who works in an industry you’re thinking of investing in.

Research stocks ‘Foolishly,’ studying companies’ financial statements, competitive positioning, and business strategy. Just about all the information you need to evaluate a company is available online. Visit The Motley Fool’s Investment Club area and let us open a Fool discussion board exclusively for your club. Being able to take care of some business online between meetings can help make your face-to-face time more productive.

There are a few perils you’ll want to avoid when starting a club. Don’t under-delegate. Each member should be an active participant. Don’t be impatient. Focus on long-term rewards. Don’t be “all business.” Have fun, offer refreshments, and socialize — perhaps even with another local club.

Learn a lot more about investment clubs in our Fool’s Investment Club area and in our book, Investment Clubs: How to Start and Run One the Motley Fool Way. A key club resource is the National Association of Investors Corp. — check it out. And finally, here’s a previous Fool article listing additional investment club resources.

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This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out — it’s a handy resource. Copyright 2011 by The Motley Fool, all rights reserved.

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and by the way.: ZENERGO.com IS A GREAT PLACE FOR YOUR INVESTMENT CLUB!

Join Zenergo (it’s fast and free) and form a Group to manage your new Investment Club! Or if you already have one, move it to Zenergo.

Groups are easy to set up (just use “Investment Clubs” as the “Activity”), and let you manage your group, message among members, post documents, use the group calendar — and keep the whole thing as private as you want.

Mac’s Investment Club Activity Page

And you can check to see if there are others in your area interested in maybe joining your club! It’s all here on Zenergo — the Activities social network — where our slogan is, Activate Your Life!
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Selena Maranjian prepares the Fool’s syndicated newspaper column, writes articles for Fool.com, has coordinated the Fool’s annual Foolanthropy charity drive, and has written a number of Fool books, among other things. She can be reached at SelenaM@Fool.com and hosts a discussion board, Selena’s Salon, a friendly corner of Fooldom.

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