There’s nothing mysterious or complicated about an investment club. You do not have to know much, or really anything, about investing, to participate in one. In fact, the educational aspect — along with making money, of course — is one of the focal points of belonging to a club.
An investment club is simply a small group of individuals, usually comprised of friends, neighbors, congregants and/or family members, who meet on a regular basis for the purpose of pooling their funds and investing in a club portfolio. You might think of an investment club as a miniature mutual fund.
While investment clubs are certainly interested in making a profit, members also find that investment clubs are a great way to learn about investing. Many clubs focus on education first and even have an Education Committee, where members rotate learning about a new topic — like a dividend allocation or PE ratio — and presenting it to the club. Clubs that maximize the educational aspects of their meetings usually find that profits follow.
With an educational component in the forefront, investment clubs can be a great vehicle for beginning investors. Clubs offer the structure that many people need to get started investing. They get you into the habit of investing on a regular basis, and they offer the support and encouragement that many people need to stay with it. Clubs also make it possible to get into the stock market without a big initial investment, which is another incentive for new investors.