Investment groups, sometimes called “investment clubs,” are groups of individuals who come together to discuss, research, and contribute to investment opportunities. An investment group can be a group of young entrepreneurs coming together or a powerhouse of professional investment brokers. Most investment groups pool money to purchase investments together, which not only increases buying power but can disperse risks. Here are the steps to take to launch your own investment group.
Start Looking for Members
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Start by looking for members to join your investment group. These could be friends, family, colleagues, or those you may meet who have a joint interest in learning about investments. It is essential to be able to trust your investment group members, as you will rely on them to not only take responsibility for learning about a particular market or opportunity but also to share the risks and rewards of the investments.
Ten to twelve members is a good number, though it can go a bit higher. Aim to have no more than 20 members in the club.
Determine a Common Goal
Call a meeting of your potential investment group and have everyone talk through their goals. You may naturally find that some members are a better fit than others, and may decide to move forward with those members. An investment group isn’t for everyone. Someone may not have enough time to contribute to research, or another may be uncomfortable with taking risks that others in the group are less adverse to.
Be upfront and honest with yourself, and with the group, about your expectations for time commitments, monetary contributions, and best practices. After gauging interest and inviting the right members to join your group, determine a common goal for the investment group. This could be a learning goal (such as doing research to look for emerging investment opportunities like the best marijuana stocks), an investment goal (investing a certain amount of money within 5 years), and/or a time goal (see a certain percentage return over a period of time).
Don’t Forget the Paperwork
If your investment group is pooling money, it is critical to get your partnership legally identified in writing. Whether you choose to form as a partnership, limited liability company (LLC), or something else, the legal entity needs to outline the leadership of the investment group (such as president, vice president, secretary, and treasurer), as well as details about how profits and losses will be shared.
Depending on how the partnership forms, taxes will need to be paid on any gains either by the individuals or the entity. Get this all worked out ahead of time, so no one has any doubts or surprises at the end of the year.
Start Researching and Investing
Now the fun part! Once the investment group is formed, you can begin to research and purchase investments. Begin by asking the group to brainstorm ideas, and then split up how each investment will be researched and reported on. Over time, the group will fall into a pattern that will hopefully fit the needs and opportunities that each individual brings to the table.
With the investment group launched, you’ll be on your way to exploring opportunities, learning about markets, and seeing potential returns.