Anyone started an investment club?

[kagarnett]

Curious how many people here have ever started an investment club with friends? I have five or six close friends who have shown interest in forming an investment club, in which we will all start with an initial amount of $100.00 (each) to invest in some stocks we decide on and we would each add a minimum of $20.00 a month to the pool of funds to invest. This would all be just for the learning experience as only one or two of us have actually ever invested in stocks yet. We are all in our early 20's and this seemed like it could be a great way to share ideas on investing and hopefully it would give everyone the knowledge to start their own stock portfolio. I have created an excel spreadsheet (I should say in the process of creating) that would update with our chosen stocks' real-time prices and I have pretty much been able to optimize the entire spreadsheet to calculate the standard deviations, returns, alphas, sharpe ratios, covariances of the stocks, correlations, betas, etc of the portfolio and stocks. I would be giving everyone in the investment club a copy of the spreadsheet and showing them how it works so that we can all keep up with the investments we make on our own, and we would be meeting maybe once a month to add additional investment and check everything. Anyone else ever done something similar with friends? We will of course have to establish a set of rules or guidelines concerning withdrawal from the club and things of that nature. Anything I need to be sure to think about beforehand?

[steelyman]

That sounds like The Beardstown Ladies.

[jimnjana]

check out BetterInvesting - Non-profit Investment Education . I didn't start a club, but I am in one. The club would be a partnership and you would have to complete a tax return etc. Members would receive a K-1 from the club/partnership. Lots of good info on their site.

[kagarnett]

Quote:

Originally Posted by jimnjana check out BetterInvesting - Non-profit Investment Education . I didn't start a club, but I am in one. The club would be a partnership and you would have to complete a tax return etc. Members would receive a K-1 from the club/partnership. Lots of good info on their site.

Thanks I'll check it out. That's what I needed to know.

[Midpack]

Obviously an investment club could be successful. Years ago a couple of us tried to start one at work using the NAIC materials http://www.betterinvesting.org/Public/Clubs/default.htm, and about a dozen people signed up. However, when they found out they'd have to put up a little money and learn to research stocks, they quickly lost interest. Most of them thought we'd tell them how to double their money every year with no downside risk and no effort on their part. I hope your experience is better than ours was...

Many here might recommend a simpler passive/index investing approach using low expense ratio mutual funds vs active stock picking like most Investment Clubs. I used to be a stock picker/trader, being successful at it does require a lot of work, so you'd have to enjoy the process (I did).

[kgtest]

I am going to start one. I have a lot of people asking me questions these days so I figured I would start a club. In less than a day I have 7 people interested and potentially more.

The tough part is going to be making the decisions and keeping up with the work to maintian the club.

[Free To Canoe]

I am in a club. $20/mo. Our motto is buy high / sell low. Research is frowned upon.


Got to do it legal though. K-1 is a pain at tax time. Now worth $80k for 7 of us (got lucky with Apple).


We have fun getting together.

[healthyandfun]

I have belonged to an investment club for more than ten years. It has been a great learning experience and I have enjoyed the friendships I have made. The club existed for a number of years before I joined and had made money. One thing I initially liked was that there were rules in place on how the club would operate and stock reports were required to make decisions. A partnership agreement is especially important when disagreements and issues come up or members leave. Members need to have a clear picture of their responsibilities in a club and the time committment involved. We follow specific stocks in our portfolio and present reports twice a year as well as bring new stocks reports to the club. There is an agenda for each meeting and members serve as officers on a rotating basis. It is run like a small business using the NAIC principles. Visit the Better Investing website for more information. Good luck!

[LOL!]

My spouse was in two different NAIC-sanctioned investment clubs, so I read a lot of Better Investing magazine years ago. They are the best way I think to do an investing club, but it is clear they have an agenda. Some of the statistics in the articles and web site are misleading.

For instance, in those days they never compared a portfolio to a benchmark, but they would go to great lengths to show how a club's portfolio made 20%! Whoopeee! That is, until you saw that a simple index fund made 35% over the same time frame (data not shown in the magazine).

Also, the NAIC method is more about growth stock investing (at least in those days) and not value stock investing.

Anyways, my spouse's clubs were glued together by social reasons and they had fun regardless of not really making more money than investing in CDs. So a lot of work for not much gain.

[dallas27]

Do the forum rules forbid one occurring here, on the site? Seems like this is a great place to pool knowledge and money for mutual gain.

[Lakewood90712]

Sounds like a lot of work , kind of like a JOB

IIRC the Beardstown Ladies were exposed as puffing up their stated returns.

http://www.moneycone.com/the-beardstown-ladies/

[jimnjana]

Quote:

Originally Posted by LOL! My spouse was in two different NAIC-sanctioned investment clubs, so I read a lot of Better Investing magazine years ago. They are the best way I think to do an investing club, but it is clear they have an agenda. Some of the statistics in the articles and web site are misleading. For instance, in those days they never compared a portfolio to a benchmark, but they would go to great lengths to show how a club's portfolio made 20%! Whoopeee! That is, until you saw that a simple index fund made 35% over the same time frame (data not shown in the magazine). Also, the NAIC method is more about growth stock investing (at least in those days) and not value stock investing. Anyways, my spouse's clubs were glued together by social reasons and they had fun regardless of not really making more money than investing in CDs. So a lot of work for not much gain.

Basically NAIC still is about growth stock investing. Each month they do highlight an undervalued stock in the better investing magazine. There are a couple of BIX tickers that track the 100 most widely held stocks in NAIC investment clubs. You can bet clubs compare their relative performance to benchmarks. More importantly each month we review our holdings to and compare to our goal of doubling the value in 5 years. Each club is unique, some clubs are more value oriented than others. One of the reasons it is hard to compare a club performance to benchmark is that whenever someone leaves a club/partnership the club can transfer their "big winners" to the exiting member eliminating capital gains and taxes for the rest of the members.

[Greencheese]

Tried it with some friends in the business department back in college. Was fun but in the end we performed below market for way too many hours of meeting.