Investment Clubs

[jimnjana]

Just wondering if anyone has any experience with investment clubs. I
am joining one that is associated with a retired military officers organization I belong to. Seems to be a great way to continue to learn. The club has been around for a long time (20+ years), and has a small but stable membership. I know the club generates a K-1 each year, but I think the tax liability will be minimal, at least at first. The buy-in is $500 then its $50 a month.

 

[samclem]

Nope. I don't much see the point with the information and exchange of ideas available online now. It is fairly easy to bounce ideas off folks/ask for opinions here, at Bogleheads, etc. With a club my money would be in a pot and subject to being invested in a bunch of things I might not think are very smart. I'm sure some folks enjoy the camaraderie or chance to socialize.
Maybe I'm missing something--what's the attraction?

 

[jimnjana]

Nope. I don't much see the point with the information and exchange of ideas available online now. It is fairly easy to bounce ideas off folks/ask for opinions here, at Bogleheads, etc. With a club my money would be in a pot and subject to being invested in a bunch of things I might not think are very smart. I'm sure some folks enjoy the camaraderie or chance to socialize.
Maybe I'm missing something--what's the attraction?

The club acts like a partnership, so you do have a say in what stocks are purchased. I think I'm sold on the idea because I'm looking to develop more of a disciplined approach to individual security analysis. No doubt that the internet and ER forum is a great way to share ideas, but I think I learn better by doing and this will force me to do.

 

[clifp]

When I was in my early 20s I joined and investment club. It was an educational but not exactly profitable experience. At $500 and $50 it isn't going make that much difference one way or another.

I certainly learned about developing a disciplined approach to investing in stocks (not that I always practice it.) It certainly helps to have a somebody like a CPA be the treasurer because there is a lot of paperwork with the partnership.

Year later my Mom joined one in her early 70s and continued in it until last year she 87 now. She also learned about investment, although sadly with her fading memory it didn't all stick.

The social benefits and educational benefit are worthwhile IMO, although it is fair question if you can't get most of the benefits online.

 

[youbet]

It certainly helps to have a somebody like a CPA be the treasurer because there is a lot of paperwork with the partnership.

+1

The club I belonged to for years had the controller from local division of a major MegaCorp as treasurer. After a decade or so, he got tired of it and wanted to bow out. We wound up dissolving the club since no one else, including me - especially me, would take over as treasurer.

We did very well. There were enough profits every year for a long weekend fishing trip for the guys and a night out on the town with the wives. Both activities booked as business meetings, of course. And we usually had profit beyond that.

There were 7 members. 6 were management level with 2 in finance. The 7th worked for the post office. Yes, the post office guy was the most valuable doing the most research and coming up with the best ideas of anyone by far! He RE'd and lives a very upscale lifestyle. Bright and studious guy.

DW and I still see two of the couples socially. We don't talk finance, economics or politics much anymore......

 

[Midpack]

We formed an investment club following the NAIC template at work about 15 years ago - before the internet mostly. I led it and was pretty excited with about a dozen interested employees. But when we started teaching the analysis (form and where to get data, S&P data and Value Line at the library) and handing out assignments to report back on stocks at subsequent meetings the whole thing fell apart. Most "members" assumed the club would just tell them what to buy (hot tips), and that they wouldn't have to contribute much of anything to invest. We had members who weren't willing to invest more than $25! Oh well, we tried...

I still think it would be a good idea with properly motivated members, though with the internet providing so many other resources who knows. I view this site and others as investment clubs of a sort...just with anonymous members.

 

[Tyro]

We had members who weren't willing to invest more than $25!

...and probably expected to get returns of $1000 or more per year on that? That's not investment money; that's "date night"/"poker" money.

That was pretty much my experience too. It's very difficult finding the right personality types for an investment club, and even more difficult starting one.

People hear "club" and think social gathering. It's not that the meetings can't be that too, but some don't realize that more is expected of them in terms of hours of real work on their own than just showing up for meetings. Maybe if they were called "investment study groups" or something more indicative of what really goes on(?)

 

[W2R]

Nope. I don't much see the point with the information and exchange of ideas available online now. It is fairly easy to bounce ideas off folks/ask for opinions here, at Bogleheads, etc.

[Admin hat OFF]

Personally I learned so much about investing from reading Bogleheads, and before that board formed, Vanguard Diehards at Morningstar. Then picked a half dozen books that looked interesting from the Bogleheads' book list and read and studied them.

Frankly I think you can get information and investment opportunities anywhere, so it is important to seek out what you view as true expertise. That can be a difficult task, but as for me, I like what I have learned at Bogleheads. I read that board and their wiki with an attempt to be discerning and to maintain a critical mind. Anybody can join and post there, so while many of the posts are baloney, at the same time so much of what I read there (especially by Taylor, Rick, Larry, and others) rings true to me. I have learned a lot there.

[Admin hat back ON]

 

[heeyy_joe]

Investment clubs - An idea that is well past its prime.

 

[Moemg]

I was in an investment club in the late 90's. Our group was very into education .We did pick stocks and were taught how to analyze them .The initial investment was $100 and then $25 a month . We each picked stocks and presented our case why they should be bought .We then voted on them . We ended up having some winners one of which was Oracle . I enjoyed the group and participated for four years .

 

[FIYes]

I was in an investment club in the nineties also. Enjoyed the club and felt it was educational. Our monthly investment amount was quite small, but the point was learning. We used the NAIC model and I even put together a little spreadsheet that followed the Stock Selection Guide ideas. Our meetings were businesslike with socialization and snacks following the business meeting and stock presentations. Our club fell apart because no one (including me) wanted to be treasurer. I am currently in a stock study group...no funds involved so need for a treasurer. Like others have mentioned, the issue is often that folks want quick hot tips, but don't want to study and analyze stocks.

 

[powerplay]

I have been in an investment club for 10+ years and really enjoy it. In fact we meet tonight. We follow the NAIC model and purchase the tax software each year for the treasurer to prepare our K-1 forms. Our treasurer has been in the position since we started the club so I guess we may not survive if he decides to step down. I am the secretary so I put together the notes after the meeting and e-mail it to the members. I've been secretary for quite a few years and am OK with continuing in that role. We each put in $50 a month and everybody has a stock or two to track and report on at the meeting. Over the years we have had a number of people come and go. It is very true that some people don't want to do the work needed and they usually drop out after a bit.

 

[Mill]

I started my own investment club, if you want to call it that. Basically it was just a ruse to keep my high school friends to stay in contact as some of us have moved throughout the country in the decade and a half since we last all hung out together.

Just to keep it simple all 6 of us threw in $300 a piece. I wrote Scottrade a check for $1800 and we have quarterly discussions about how and what we should invest in.

Surprisingly we are doing well (doubled our original investment so far) and each member seems to be genuinely interested in each decision that is made with our stock picks.

Thankfully we do not do much trading as I eat the tax costs of capital gains and dividends, but really its peanuts anyway and it keeps us all in contact.

 

[chasesfish]

I think every one else hit on the main issue - it's fun to do, but a pain to administrate. You generally have to form a partnership, register with the state/IRS, then file a partnership return every year. On a low dollar club, that's just painful and kills your return. I'd love to find one for the social aspect though