Investment Club

Individual investors often join together, either formally or informally, to form investment clubs. They form clubs for a variety of reasons, including limiting each individual's risk, assisting each other with investment decisions and advice, or participating in larger investments at lower commissions. To form an investment club, a group of persons pool limited or stated amounts of funds to invest together. Each member of the club contributes a certain amount of capital, with additional money added each month or quarter. Investment decisions are usually made by majority vote. These collaborations range from small, informal investment clubs to large groups with written agreements, charters, and bylaws.

If you're part of an investment club, you and the other members jointly choose the investments the club makes and decide on the amount each of you will contribute to the club's account.

Among the reasons that clubs are popular is that they allow investors to commit only modest amounts, share in a diversified portfolio, and benefit from each other's research.

Clubs may also pay lower commissions, as a result of arrangements they make with a brokerage firm or through the National Association of Investors Corporation (NAIC).

NAIC provides information on how to start an investment club and provides support services to existing clubs.