If you would like to get into the world of investing but have limited funds or limited knowledge of what it takes to make successful trades, then maybe the best thing that you could do is to start an investment club. An investment club is a perfect way to begin trading on the stock market and limit your risk at the same time.
When you begin an investment club, you will share the risk with all of the members instead of bearing all the risk yourself. This means also that you will have to put less cash up front, so that if the club makes a bad trade, then you do not lose as much cash as you would if you were investing on your own.
One of the first steps to creating an investment club is to find people who would be interested in joining. You should start by asking your friends and family members if they would be interested in joining your investment club. Before you begin however, be sure you pick your fellow investors wisely, and only ask those whom you can trust and get along with readily. Your ideal candidates will be people who are interested in watching the stock market and have a little bit of cash they can out into the club on a monthly basis.
After you have chosen your recruits you will need to be certain that everyone has the same goals for the investment club. Some individuals will be more focused and serious about the club while others may try to look at it as a social or educational experience. Find out where everyone stands on what the goals of the investment club are going to be, and write down the goals put forth. Once a goal has been agreed upon, it is time to talk about the monthly financial dues.
Once you have the membership issue settled and a clear goal agreed upon and written down, it is time to decide upon the financial contributions that each member will be required to make on a monthly basis. You must make sure that the agreed upon amount of the monthly investment will be substantial enough to buy stock, but also be affordable to all involved.
Depending on the size of the investment club, you could make the decision in $25 amount increments. Each person would agree to provide the monthly funds on a timely basis on an agreed upon date. Larger clubs of more than 10 can make dues smaller and still make decent trades. It has been suggested that $50 be the number for ten members and under. Whatever you decide, make sure everyone can afford to put this money forward with no ill consequences.
After you have squared all of the above away, it is now time to create an Operating Agreement which covers how the club business will be conducted. When you set up the bank account for the club, the bank will require that you furnish your incorporation papers or partnership agreement.
Setting up your own investment club can be a very rewarding experience in more than just the monetary gain that you may make. It also serves as an education into how a business works, as well as the stock market.