Starting and Running a Profitable Investment Club

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Starting and Running a Profitable Investment Club

• Sunday May 21st 2000

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What is an Investment Club?

• Group of like-minded people interested in
  investing in the stock market.
• 10-25 enthusiastic people
• Agree to a few basic investing goals and
  principles
• Meet regularly

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National Association of Investors Corporation

• Non-profit organization focused on providing
  sound investment information, education and
  support to both individuals and clubs
• Formed in 1951
• Proven investment philosophy

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Investment Philosophy

• Invest a set amount regularly, usually once a
  month, regardless of market conditions.
• Reinvest all dividends and capital gains.
• Buy growth stocks - companies whose sales are
  increasing at a rate faster than industry in
  general.
• Diversify your portfolio - invest in different
  industries and different size companies.

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Membership

• NAIC's membership - 730,000 individual and
  investment club members
• Investment clubs - 37,129 clubs
• Individuals - 55,597 members

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Membership Facts

• 67 are female and 33 are male
• Median age of NAIC members is 50 years
• Average investment club age is 4 1/2 years

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Why the Stock Market?
1926-1994 Study from Ibbotson Associates
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Why Invest?

• Childrens Education
• Home
• Car
• Travel / Vacation
• Retirement
• Higher Quality of Life

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Club Advantages

• Learn about the stock market without risking a
  large sum of your own money
• Each member brings their personal experience and
  knowledge to the group
• Chance to meet new people and get together with
  old friends
• Structure
• Discipline
• Minimizes Emotional Decisions

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Club Mission

• Education
• Social / Networking
• Profit

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Club Expectations

• Most clubs report a loss during first year
• Dues are an investment in learning
• Most clubs stay even second year
• 40 fold during first two years
• By third year, most clubs post first earnings
• 670,000 members Avg. Annual Return of 12

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Club Structure

• Recommended to organize as Partnership
• Agree on a Club name
• Adopt a Partnership Agreement
• Elect Officers (optional)
• Committees
• Monthly Meetings
• Create operating procedures
• Open account with brokerage service
• Ameritrade, E-Trade, Datek, etc.

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Club Officers

• Presiding Partner (President)
• Assistant Presiding Partner (VP)
• Recording Partner (Secretary)
• Financial Partner (Treasurer)

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Club Committees

• Education
• Stock Selection
• Hospitality

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Club Principles

• Invest regularly, regardless of the market
  outlook
• Reinvest ALL earnings
• Invest in growth companies
• Diversify to reduce risk
• Long term commitment

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Costs of starting an Investment Club

• NAIC Registration 40 plus 14 per member
• NAIC Club Accounting Software 211
• Partnership Registration 30
• Total startup costs will come from the initial
  contributions
• The 14.00 membership fee includes a subscription
  to Better Investing Magazine.
• The Partnership Registration fees noted above
  will vary from State to State.

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Club Start Up Activities

• IRS ID Number
• Bank Account
• Stock Broker
• Acct. (NAIC) Software
• Meeting Place
• Meeting Time
• Amounts to Invest

• Assign Companies
• Research Companies
• Visit Stores
• Decide on Buys
• Invest
• First Trade

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Next Meeting

• Adopt Operation Agreement
• Operating Procedures Details
• Elect Officers
• Individual Responsibility
• Set Regular Meeting Date
• Decide Amount of Monthly Deposit
• Selecting a Broker
• The Club Name
• Join NAIC
• Review NAIC's Official Guide
• Start a Study Program