Starting an Investment Club

Remember how much fun you had in high school? Debate club, physics club, math club, drama club; no matter what type of group you were involved with, you made great friends and had lots of laughs. As an adult, we rarely find those kinds of opportunities to create small communities of friends outside of work, so why not consider starting an investment club?

Starting an Investment Club: What It Is

Realistically, an investment club can be whatever you want it to be. It could consist of simply getting together with members and discussing the latest stock trends, or it could be a matter of pooling money together and investing as a group. An investment club gives all members an opportunity to learn about different types of investments in the world, as well as celebrating the gains and commiserating over the losses.

Starting an Investment Club: Organization

Some investment clubs go so far as to have rules, while others are more informal gatherings of friends. If you are intending to invest as a group, however, there should be guidelines for monetary commitments that each member should make as well as a written contract for how the profits (or deficits) will be divided.

Starting an Investment Club: Taxes

An investment club will have to pay taxes on all profits earned. One of the best ways to secure the legal aspects of your investment club is to create a limited partnership between members. That creates a binding agreement between all of the members, and you can apply for a taxpayer ID through the IRS. It is also the least complicated come tax season because each member will simply add the Schedule K addendum to his or her personal tax reports.

Starting an Investment Club: Meetings & Activities

As mentioned above, an investment club can be as formal or as informal as the members would like. You can schedule weekly or monthly meetings to go over your investments and to track profits, or you can simply get together whenever it is convenient for everyone. You might want to schedule meetings with your broker to ensure that you have all of the information. Meetings will also give each member a chance to propose new investment ideas.

Starting an Investment Club: Disagreements

Even if your investment club is a friendly group of old friends, disagreements are bound to surface. Money can create resentment among even the closest of friends, so implement a strategy for dealing with such disputes. For example, your investment club can adopt a "majority rules" mentality, or you can decide that decisions must be unanimous.