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Many people are afraid of investing in the stock market, and for good reason. If you’re not some combination of smart, careful or lucky, you can lose money in a hurry. On the other hand, the lure of the stock market is powerful: There aren’t many investments that can return 70% in a little more than one year. That’s how much the stock market has gone up between the lows of March 2009 and April 2010.
What’s a beginning (or nervous) investor to do? Learn and earn at the same time by joining or starting an investment club. Investment clubs are a simple idea that’s been around for more than 50 years: Get some people together, throw $20 – $50 each monthly into a club account, share the research work, then invest your club’s money according to majority vote.
Meet some members of an investment club and listen to them share their experiences by watching the video below, then meet me on the other side for more.
So, an investment club allows people to get together once a month in a social setting, pool their resources and divide the research required to pick some good stocks. And what they learn as a group they can then take home and use to invest individually.
The oldest organization helping people find and/or form investment clubs is the National Association of Investment Clubs, or NAIC. On their website, BetterInvesting, you can find a chapter (basically a geographic area), and then find a club within that chapter. They’ll also hook you up with all the info you’ll need to start your own club along with the education you’ll need to successfully learn to pick your stocks and mutual funds. To access all that, however, you’ll have to become a member for $79/yr.
While your initial temptation may be to join an ongoing investment club, it may be harder than it seems. There’s no shortage of clubs out there (NAIC claims 25,000 in North America alone), but many aren’t looking for new members, and those that are might not appeal to you. For example, the members of the club we visited were mostly retirees. If you’re 22, that might not be your ideal scenario. The perfect club is one where you fit in and can enjoy your fellow members socially as well as intellectually.
So if you don’t find an existing club you’d like to join, get a few friends or co-workers together and create your own. As I said above, NAIC can provide everything you need to get started. Another site you might try is Bivio. For $99 a year, they’ll track your club’s activity and handle the requisite tax forms. Of course, if you’re sharing the workload, keeping track of investments on a free website like Yahoo! Finance or MSN Money and doing taxes together once a year isn’t too bad.
Want to know more? Motley Fool did a nice series on investment clubs you should check out called Introduction to Investment Clubs.