How to Start Your Investment Club
Investment clubs are a good way for individuals to pool knowledge and resources to make investment decisions. The club can be an informal group simply meeting to discuss information, or the members can elect officers and start a pooled account for investment funds. In the latter case, you will be forming a business entity and certain legal guidelines will have to be followed.
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Instructions
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Choose who will be a member of the club. You may start with friends, family or maybe form a neighborhood group. For best results, at least some of the members should have basic to extensive investment knowledge.
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Elect officers and draw up a partnership agreement. You can find sample agreements online at sites like BetterInvesting Community. This will cover what duties the officers will fulfill, when meetings will be held and operating procedures for making investment decisions.
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File IRS Form SS-4 to get your employer ID. Your club will be operating as a partnership and will have to file an annual federal -- and possibly state -- tax return. You'll need a Employer Identification Number, which serves like a Social Security number for business entities and is included on all tax returns as well as being used to track income.
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Decide how much each partner will be required to invest and how often. A general guideline would be from $25 to $100 per month but can be more or less depending on your decision.
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Open a partnership checking account at a nearby bank to deposit money and write checks. You will also need to set up a brokerage account. You can choose a full service brokerage that will assist in your decision making or a discount brokerage that will simply invest as you advise them. For greater convenience you can go with an online broker.
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Tips & Warnings
It's a good idea to set guidelines on how much time each member should devote to research so a few people don't shoulder all the burden. You might also want to take turns doing research with a different person reporting for each meeting.
Make sure one responsible person is in charge of bookkeeping. To file your income tax you must track profits and losses and provide backup.
References
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