Forming an Investment Club: Your First Meeting

by Michelle Kennedy Hogan


Before the first meeting, request some of the free materials from the NAIC (www.betterinvesting.org). If you are not online, or not supposed to be using your internet connection for personal use (we won't tell...), you can write them at: 711 W.Thirteen Mile Rd. Madison Heights, MI 48071. After printing out materials, copying pages from books, or (copying these articles!), secure a meeting place, a local school cafeteria or library meeting room will be available for free. Invite people by sending out invitations, putting up fliers or sending a press release to the local paper.

At the meeting, go over the materials you have provided. Explain the benefits of an investing club, why you thought it was a good idea and maybe go around the room and have everyone introduce themselves and explain why they thought it was a good idea. Emphasize that it is not a get-rich-quick opportunity. Explain the principles of slow wealth building. Ask for questions, perhaps have an experienced investment club member or a member of your local NAIC council field them.

If everyone still seems very much interested, go on to organizational procedures. The NAIC guide "Starting and Running a Profitable Investment Club" goes into extreme detail on forming partnership agreements, selecting officers, and has sample agreements for you to follow. Do not feel that is necessary to invite an accountant or lawyer to the meeting (unless they're a prospective member!), all of these procedures can be done by a well-organized group. You will need to decide a time and place for your meetings. Try and make them at the same time every month.

After deciding when the next meeting will be, establish the amount to be deposited be each member every month. Make sure everyone knows that the amount is risk capital. Even though you will be studying hard, and are expecting a good rate of return (as well you should), members should expect losses, and not expect unreasonable gains. Beginning clubs should make it a policy to not encourage withdrawls within the first few years, but let everyone know that they always have access to their money if neccessity dictates. New members may be added at any time without having to match the previous financial contributions of current members. Your accounting system, and there is one available through the NAIC (and we will have one available for you soon), will allow for such.

You will need to discuss the idea of working with a broker. If you are an online club, you can take advantage of the discount brokers with online trading available. If you are not comfortable making all of your own decisions and decide your club needs a full-service broker, maybe decide on just using one for the frist few purchases you make. Really, the idea of your club is for you to gain experience and an education so that you won't need to rely on a broker for advice (and won't need to pay the higher commission involved either).

If the majority of folks in your club are not yet online, go to the local library, take one of the free internet classes available, maybe as a group. Utilize the internet, research the companies you are interested in through their web sites, there is usually a prospectus available, and other pertinent shareholder information. If someone gives someone in your group a "hot tip" make sure you back it up with research. In selecting a broker, whether full-service or discount, you as the organizer should build a small profile of several, and then ask them about their philosophies on helping investing clubs. Then you can make recommendations to the group at the intial meeting.

After you have agreed on the formation of a partnership, officers will need to be elected. You will need a presiding partner, an asst. presiding partner, a recording partner and a financial partner (or a pair of financial partners). The presiding partner develops and agenda, sets the time and place for meetings, assigns committees, presides over meetings. The asst. presiding partner takes the place of the presiding partner should she be absent, and leads the educational study of the club (perhaps recommends reading materials, hosts a library, etc). The recording partner records the minutes of the meetings, sends out any necessary announcements, invites or press releases, and perhaps creates a short newsletter, quarterly for the club. The financial partner keeps track of deposits and withdrawls, purchases and sells stock, prepares a monthly statement, and files an annual informational tax return with the feds. This partner should get a copy of the NAIC's club accounting kit...it will make the job much easier. There is also software available for the same purpose.

Don't forget to pick a name! Make everyone bring back a couple of suggestions with them to the next meeting. Have fun, and remember to focus on learning as much as earning.


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