Five Tips for Starting a Successful Investment Club
by Douglas Gerlach

Successful investment clubs share a few common characteristics. To help ensure that your club succeeds, follow these five tips:

  1. Join NAIC. The National Association of Investors Corporation has been helping individuals to start clubs for nearly 50 years. They have manuals, sample agreements, and brochures to assist new clubs in forming, as well as a monthly magazine and stock study tools. NAIC membership is a great first investment for a new club.
  2. Agree on an investing approach. Members of successful clubs share a unity of purpose. If some members in a club want to pursue short-term strategies, and others prefer to buy and hold, the resulting discord will doom that club to failure. All members should understand and abide by the club's approach to investing.
  3. Think long-term. Even in an online club, it can be difficult (if not impossible) to manage a short-term investing strategy, where decisions to buy or sell stocks need to be made very quickly. A long-term, buy and hold philosophy -- planning to own every stock for five years or more -- has proven to be the best approach for the majority of clubs.
  4. Use your computer. Software makes the number-crunching part of club recordkeeping and investment analysis much easier to bear. NAIC sells club accounting software, which should be every club's second investment (after NAIC membership). Also, the Internet provides terrific resources for investors, and e-mail is a great way to communicate with fellow club members, whether your club meets online or off.
  5. Education is key. Clubs that operate with the primary goal of educating their members about investing will find that profits naturally follow.