How to Start an Investment Group

Investing in real estate, commercial properties, or other business ventures is an attractive option for many people. Unfortunately, most individuals lack the capital necessary to make a significant investment on their own. Starting an investment group is an option for people in this situation who wish to become involved in investing. An investment group is a group of people who join together and combine their funds for the purpose of investing and learning more about the process of investing while minimizing their overall risk.

Difficulty: Moderate

Instructions

Things You'll Need:

• An attorney

1. Prospect for fellow group members. If you don't already have contacts that are interested in joining your group, you can prospect by placing ads in online newsgroups or by networking within your community. Make it known that you are seeking business partners for the purpose of starting an investment group.

2. Be sure to qualify your prospects well. It's important to protect yourself, even when you're working with friends. Choose business partners who share similar goals and similar interests. Consult with an attorney to determine if there are additional steps you need to take to formally set your group up as a business. Have your attorney draw up a legal agreement that outlines the role of each of your group members, how decisions will be made, and how profits will be distributed.

3. Hold a group meeting to discuss investment options. Your group may choose to invest in stocks, mutual funds, or even businesses. Try to come to a group consensus, and choose investment options that are appealing to all parties. Use the resources of your group to decide which options are best for you. Each of your group members will bring different expertise and a different perspective to the table.

4. Decide how much money each member of your group will contribute and how frequently. Some investment groups operate with a $20 monthly contribution from each member, while other groups have monthly, quarterly, or annual contributions in thousands of dollars. Choose an amount and a frequency that is comfortable for all members of your group.

5. Diversify your investments. When choosing investment options, don't place all of your group's resources in one opportunity. It's smarter to choose several promising options and distribute your funds among various investment opportunities. If one investment fails, your group won't lose all its resources. Your other investments may prove profitable, and you can redistribute your funds accordingly.

6. Elect a treasurer or administrator who is responsible for disbursing funds and maintaining accurate records of funds disbursed and statements of earnings. You can also choose to elect an administrator for each type of investment your group is participating in.

7. Hold periodic meetings with your investment group. Initially, you may want to meet more frequently until all decisions have been made. After you've established investment opportunities where you'll be disbursing your group's collective funds, it might be more feasible to meet quarterly or bi-annually. At these meetings, you'll want to review the progress with each of your investments, and decide as a group whether you will keep your investments status quo or whether you should redistribute your funds into different investments.

Tips & Warnings

• Operating your investment group as a business can reduce your personal liability in the unfortunate event of a significant loss.
• Do not attempt to operate as an investment group without a legal agreement in place. Friendships can be ruined by disagreements, and you could be at risk of being taken advantage of.

Resources

• National Association of Investors Corporation
• EZ Investment Clubs

[versandra]

on 7/16/2009 This is a wonderful article I found that assisted me in building the foundation for a start-up investment group. See the resources at the bottom of the article and if you need an attorney to get your group started or you want to participate in our group, drop me a line. Peace