How an Investment Club Works
When you join an investment club, which usually ranges from 12 to 16 members, each participant assumes a particular role. You may be the group leader, buyer, or part of a stock selection committee. Many clubs give every member the responsibility of researching a specific stock or an entire market sector and making a report at each meeting.
The work of investment clubs is similar to mutual funds–you pool your money with other members and consequently can purchase more shares than you could by yourself. Only you don’t hand over the day-to-day portfolio management to a professional money manager–you and your fellow members are the managers.
Club members are therefore responsible for:
- Researching securities and presenting the data to the rest of the group.
- Opening a brokerage account.
- Executing trades, either through a broker or online via the electronic trading system.
- Making ongoing buy and sell decisions.
- Tracking and reporting overall portfolio performance.
- Accurate management and reporting of taxes for each member.
- Maintaining buy and sell confirmation paperwork and other administrative tasks.