A Peek Inside "Members-Only" Investment Clubs

Provided By www.stocktradingonline.org

One of the astonishing developments in investing in the past 10 years has been the rapid development of investment clubs throughout the nation. A New York Stock Exchange (NYSE) survey indicates that there are at least 20,000 clubs in existence, with a total membership of more than 277,000 people — and more are forming, at a phenomenal rate, every day. The market value of the clubs' holdings tops $160 million, and they are pouring $2 million of new investment into the market each month.

This is all the more remarkable when one considers that most clubs are less than three years old, and that nine out of 10 have a portfolio valued at less than $10,000.

No concerted organizational or promotional effort has created these clubs. They have sprung up spontaneously as the realization has spread that here is a device enabling people of modest means to educate themselves about investment and to acquire stock in an orderly, consistent, and intelligent manner.

In outline, a club's members meet regularly, contribute funds equally, study investment possibilities carefully, and agree jointly on shares to be purchased or sold. The unique features of this procedure are, first, that by responsible group effort the members can learn the complexities of investment and, second, that by aggregating funds they can acquire stock with individual contributions even smaller than the Monthly Investment Plan (MIP) minimum.

Most clubs are composed of neighborhood friends or business associates. Sometimes they are employees of the same firm, sometimes members of a fraternal or religious group. The majority of clubs have all-male memberships, although some 3,800 include women, and something over 2,000 are exclusively for the ladies. A group of policemen form the New York's Finest Investment Club. A group of Maine businessmen, who have been long-time hunting companions, are now stalking profits as the Katahdin Investors Club. Some avid bridge players have become the Bridge Investors Club; the Johns-Manville Club is made up of J-M employees. Essentially, these alignments assure a pleasant social atmosphere and economic compatibility, so that everyone can contribute equally to the club's program without strain.

The average club membership is 15, a few get to 20. Many clubs start with six or eight, and grow as interest is aroused. Experience indicates that 12 to 15 members are best able to conduct the business of the club. Beyond that number, things get somewhat bulky and unmanageable.

It can be extremely helpful to have a lawyer, accountant, and/or banker among the members. This is not always possible, and many clubs are operating successfully without them, but if they are not members, they should be within hailing distance to give professional advice on legal and tax matters, where necessary.

Clubs should also establish an account with a brokerage and get to know the customer's representative who is handling it. He can be a source of much useful information on the new and unfamiliar field the club is entering. Many brokerage houses are happy to have representatives attend occasional club meetings to explain brokerage and market operations, security analysis, and economic trends.

The advantages to joining an investment club include being able to put your head together with other people interested in successfully investing. If you work well with others and feel you could benefit from input (as well as have the available funds to contribute monthly) joining a members-only investment club might be right for you.

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