The term strength in number readily applies to the concept of an investment club, which is simply a group of like minded investors with the same investment goals congregating together to help one another achieve financial success in the treacherous world of stock investing. The benefits of joining an investment club are numerous and the experience can be very satisfying both from a financial standpoint and a psychological one.
Virtual investment clubs serve an educational purpose and can be a great starting point to learn the intricacies involved. These clubs actually perform stock trades in real companies and can be a fantastic tool toward advancing to a real investment club.
In a certain way, an investment club can be considered almost as a miniature mutual fund, but without the corresponding management fees and other fees that can negatively impact investment funds. An investment club strives to duplicate and maybe even improve on the financial rewards expected of well paid money managers who all too often do not deliver.
Benefits of Joining an Investment Club
- Resource pooling: Investors with limited funds can find investment clubs awesome just for savings purposes. People with limited amounts of money may find it better to just spend it; joining an investment club means that even that small amount of money can be invested, and with the magic of compounding, turn it into a really substantial amount of money in the long run. Most individual investors do not have the financial wherewithal to achieve a truly well diversified portfolio, whereas pooled resources make that goal more easily attainable, then all members can share in the benefits that diversification can provide.
- Access to knowledgeable analysis: With regular meetings, members will be open to different perspectives about different stocks, and informed discussions can lead to overlooked but worthwhile stocks. Some members may be more attuned to how the stock market works, but all can learn.
- Social network: An investment club is a fabulous place to gather with like minded investors and the camaraderie that develops after a few successful trades can be immeasurable. The collective wisdom of the members can far exceed the success that can be achieved on an individual basis.
- Discipline and commitment: A truly successful investment club is democracy in its purest form, with discipline and commitment to one purpose the driving forces behind the ultimate goal desired, which is to make all members create more wealth with a little help from other committed members.
- Reduced risk: Personal losses are minimized, and it would do well to keep in mind that not all trades will attain the level of success desired. Patience is always required, whether investing individually or in a group. Having group support in down times will lead to resilience and the will to lead the charge when things turn for the better.
The National Association of Investors Corporation (NAIC) is a non profit advocate of collaborative investing and can assist in starting and effectively maintaining investment clubs, such as help with appointing a president and treasurer, or opening a brokerage account for trading.
Little mentioned about the benefits of joining an investment club is that the principles that have been learned can then be applied to your own unique style of investing.