The investor comes in all shapes and sizes. One method of investing is to form a stock club. The members of the stock club pool a set amount of funds each month or quarter and then as a group decide which stock or fund to place their investment dollars. The members could be people you know from church, school or a chat buddy on the Internet. The stock club is made up of people from all walks of life and income levels. Generally, the stock club are comprised of people of like means and interests. The number of members in a stock club may be as small as four and as large as 10. The important ingredient in a stock club is that all members have a voice in the decision making process.
Formation:
After your group is formed a method of handling the funds and other administrative duties should be initiated. One method is to have a rotating treasurer or secretary of the group. This stock member will handle the funds contributed by the club. A good method of starting out on the right foot is to set forth the basic rules of the group in a letter. The rules should include how much money each member will contribute each month or quarter. How the decision on investments are made. How the members of the group will present their investment choices to the group. How is the final decision is made either by a simple majority vote or super majority. The members can rotate the presentation of their stock picks. Each presentation should include the financial information of the company and the last three years of prices and any other material relevant to the stock.
Basic Decisions on Finance:
The stock club should open a business account with a local bank or on-line bank. The choices of how you want the club account to be named on the account is up to the members. The stock club account should be set up with at least two signatories on the account. If you want all members to have the ability to deposit and access the account that is up to you and your bank.
The next step is to locate an on-line stock account. Depending on the on-line stock account you may need to open the account in the name of one or more members. If you have a fictitious name selected for the name of your group you may need to register the name with the state or county. Try and keep this aspect simple. You are not a big investment club. Keep the entity simple. If you need assistance ask your favorite banker or lawyer.
The Meetings:
The meetings for the stock club should be organized like any formal meeting. You may all be friends and it does not need to be stiff, but the purpose of the meeting is important. Discuss any old business. Keep notes of the event. Allow each member to present their opinions in an orderly fashion. Set aside an adequate amount of time for the presentation of a new stock opportunity. Allow all members to ask questions of the presenter and state their opinion. The final vote should be noted. Finally decide on the date of the next meeting.
The Dog Investment:
In the course of things someone may pick a real dog for an investment. The stock club should not worry about a bad choice, but as soon as it is apparent to all members that the stock is not going anywhere, sell. The group can learn from its mistakes, but it is important to move on. Set objectives for the stock club at each meeting. By continuing to set goals and objectives the stock club remains vibrant.
Winding Things Up:
At any given given point the stock club may decide to dissolve the group. At this point the process of winding things up may require some formality. Closing accounts, dispersing funds to the members and the like. If a large sum of money is involved the members may decide to ask for the assistance of a tax accountant. The fee should be paid out of the funds accumulated and charged against the account before disbursements are made.
The stock club is an enjoyable way to make long lasting friendships and to make a few dollars in the process. The stock club is a means where the smallest individually can become a viable group.
