How to Start an Investment Club with your Friends without Killing Them

One of the best ways to learn about trading on the stock market is to join an investment club. Day trading, the NASDAQ, hedge funds, and short selling – the intricacies of the stock market can be complex and confusing. For beginners, it can be hard to know where to get started. Starting an investment club with friends is a great way to learn about trading while sharing the workload. The trouble is that it can be difficult to mix friends and money, and while you may have experience exchanging money with your friends, an investment club is no fantasy football league. Here are some tips to start a successful investment club with your friends.

1. Set the Tone for your Investment Club

When friends get together, good times closely follow. The conversation goes from sports to relationship troubles, to funny stories and back again – all lighthearted and casual. When you meet for your investment club, it is important to declare your meeting business time. Whether each member has invested a few dollars or thousands, you must all keep in mind that you are all making decisions with each other’s money. Respect for the investment club and each other’s finances cannot be overstated.

2. Agree on Terms

You should use your first meeting to agree on the what’s and the how’s. Make clear the function of the investment club and what is expected of each member.

Answer these questions:

• How are you investing?
  • Are you all going in on the same stock or are you meeting to share strategies and notes?
  • How do you agree on what stock to invest in?
• How much do you invest?
• What are the rules for missing a meeting?
• Can new members join? How?
• How do you handle a member that wants to get out?
• What kind of broker will you use?

Draw up a mission statement or your own Constitution that you can refer back to if things get confusing in the future.

3. Structure Your Meeting

Sticking to a structure is the best way to make sure that your investment club meetings run efficiently. It can be easy to lose track of time when sitting with friends and before you know it, hours have gone by and you haven’t gotten any real work done. Plot out the pacing of your meetings to make sure you stay on topic.

Assign time to discuss:

• Current portfolio
• Troubling stocks
• News of businesses or stock market
• Presentations of new stock pitches
• Vote
• Potential new members
• Other News

Consider appointing someone as the ‘On-Point Czar.’ Maybe get a gavel. If you don’t trust your friends with something shaped like a hammer, maybe don’t get a gavel.

4. No Room for Freeloaders in an Investment Club

The biggest take from starting an investment club is not the money. At least, not at first. You will really benefit from group efforts to learn about the stock market. Maybe one of your friends went to school for finance. Maybe another is a member of a different investment club. Your one friend who was the bookworm in high school is a valuable asset because he does his homework, while your other friend is really good at thinking outside the box.

In any case, participation is key. It is not enough to chip money in every week. Task each member with doing their homework and asking questions. Keeping a rotating calendar of whose turn it is to host the meetings is a great way to keep members on their toes and actively involved.

5. Make it Fun

Just as important as taking your investment club seriously, it’s important to leave room for fun. There is a reason you’re in a club with friends instead of answering an ad on a library bulletin board. Implement fun games or rules during the meetings. Make the person who pitched the worst stock buy the first round of beer if you meet at a bar. Wear barrister wigs at the meetings or get jerseys made. Design a logo for your club. What’s the name of your investment club? Is it ridiculous? Why not?