How Can I Find a Club?
by Douglas Gerlach

Q. I'd really like to join an investment club, but I can't find one in my area. How do I go about finding a club that will admit me as a member?

A. You've discovered one of the major obstacles many investors face when they set off on the investment club path -- finding a club to join. Unfortunately, there is no easy solution to this problem. Here's why:

The U.S. Securities and Exchange Commission looks askance at "unregistered securities" that publicly advertise for investors. Since clubs are not required to register as securities with the SEC (as long as they operate within certain parameters), they are prohibited from publicly soliciting for new members. Such an advertisement could potentially be seen as a "public offering of a security," and that gets too close to SEC-regulated territory. The SEC proscribes how a company or individual can advertise a security to the general public. As a result, you'll seldom see investment clubs actively and publicly soliciting new members. (This doesn't mean you can't tell people about your club or ask them to be members, but it's probably not a good idea to take out an ad in your local newspaper promising big returns if people join your club.)

The National Association of Investors Corporation (NAIC) can't help either. Even though nearly 40,000 clubs are members of NAIC, the organization can't provide people with referrals to specific clubs. Again, securities laws get in the way -- providing a referral to a club could be construed as recommending a security. Only licensed broker-dealers or registered investment advisors can give investing advice (not to mention liability issues if an individual were to be referred to a money-losing club).

Finally, most investment clubs are private affairs, made up of people with a natural affinity. A club's members may attend the same church or social organization, be part of a family or neighborhood, or have some other thread that ties them together. Many clubs don't actively seek members who aren't already part of their social network.

But here are some tips to find a club to join:

1) Attend an event, such as an investors fair, sponsored by your local NAIC council. There are 110 regional chapters of NAIC all across the country, and they all provide classes, workshops, and other events in local communities. At many events, investors are able to sign their names to sheets of paper indicating that they are looking for a club to join or are a member of a club that will accept new members. Also, an NAIC event may be a good way to network with other NAIC members, many of whom will be club members. If you indicate that you're looking for a club to join, you may be able to wrangle an invitation.

2) Post a message in our message boards and ask fellow readers if they know of any clubs in your area.

3) Form your own club. A successful club can operate with as few as five or six members. Don't get hung up trying to find a large group -- a smaller group of interested people can build a viable, long-standing club.

4) Consider forming (or joining) an online club. The same problems may arise with finding an online club as with an "in-person" club, but there are dozens of online clubs with Web sites that describe their approach to investing.

Above all, don't give up. Investment clubs are a great way to learn about investing, and can be a fun and profitable way to get involved in the stock market.