Investment Clubs

There are two types of investments clubs. The first type of investment club is an educational model where like-minded people meet to discuss strategies for share market investment. The second type of investment club is one where investors pool resources to buy shares.

Investment Clubs – Educational Model

These clubs may be as simple as a group of like-minded friends, creating a time when they meet to discuss their thoughts on investing. Each will be doing their own research and sharing the information they have gleaned. Some may have special skills such as charting or analysis of company data. Their expertise is shared with the group.

Educational Investment Clubs may have a more formal approach where they will most likely pay a small fee to cover the cost of engaging speakers and hire of the venue. There will be a committee that will arrange the agenda and speakers.

Some share-market trading platforms or share information subscriptions may also arrange clubs throughout the country where members can meet to discuss their views.

As a member of Lincoln Indicators’ Stock Doctor, I can attend my local group. The meeting is generally held in the format of one person delivering an overview of the market, using the Stock Doctor charting program. If they have members in the group who have specialist knowledge, they may also give a presentation. They also keep a “fictitious” portfolio where members contribute their thoughts on best shares to purchase and if required which shares in the portfolio should be sold. They are groups of ten to twenty people. The venue is usually in a room that is provided free, and members are expected to purchase coffee and snacks. It is a very congenial arrangement.

Investment Clubs – Pooled Investing

The Australian Shareholders Association advises against this format. For this type of investment club, a legal entity must be created.

The first type of investment club is a legal partnership, but this creates problems when partners want to leave the group. The second and more popular form of an investment club is a limited liability company (LLC)

The clubs normally have a monthly contribution. The amount can vary for different members. An initial lump sum may be required when joining. The club will need to monitor the value of the pooled resources assigned to each member.

There is no regulatory body that oversees the management of these investment clubs.

If you are a member of an investment club, please share your experience in the comments.