The impetus for starting an investment club came in October 2008. The market was down about 30% at the time (who knew it would drop even lower) and several of us started talking more about the market and the economy in general. The idea was floated out there to start an investment club, so we looked online for some tips on starting a club, and held an initial meeting to see if it was feasible to make this happen.
Everything I have read stressed the importance of having an initial meeting to find out everyone's background, interests, and financial goals. If everyone is not on the same page, it can lead to issues down the line. People who are best friends can end up acting crazy when it comes to money. 6 people were invited to join initially, and 4 of us were able to make the time and effort commitment that would be needed to start up a club.
This leads to why we actually started the club. It turned out that all of us was really learning about investing so that we did not have to rely on someone else for advice, and are smart enough to make decisions on our own. Since we all have engineering degrees, we figured our math and analytical backgrounds would be a big benefit to us and help temper much of the emotion that so often causes people's portfolio to rise like a balloon, only to be popped and then plunge into the depths of hell (which is what is happening to many unfortunate people right now). Only time will tell if this works out, or is a complete disaster, but in the end it should be a good learning experience.
This is not to say everyone should have the same reasons for starting a club. We want to beat the market because we are cocky and think we are smart, but others might want to start a club to understand the basics of investing so as to not get swindled by someone, while others might only want a place to bounce stock ideas off other people. Whatever the reasons, if you can find other like-minded people, starting a club will probably be a good use of time.
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Five compelling reasons to start at stock club...
1. You are probably pissing away more money than a monthly contribution might be, so why not put it to good use... if nothing else, it is a more entertaining way to lose your money over a longer period of time.
2. You have aspirations to be one of the balding middle aged talking heads on CNN/MSNBC/Bloomberg someday.
3. It gives you a good basis of financial knowledge that can be thrown around at cocktail parties or other events that warrant the need to sound important or interesting... "Listen Jim, when the P/E ratio comes down and the dividends increase, I might take another look at Sun, but until then I still think the smart money is in IBM."
4. You're banking on the economy to improve at some point before you retire.
5. The authorities informed you that purchasing a dingo for a pet is illegal, so you need to find a spot to put that $500 you've saved over the last year.
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