Investing for Fun, Education, and Profit.
Are you a lone wolf investor, or would you rather run with the pack in an investment club?
It was a sunny spring day many years ago when a coworker came into my office with a clipping from the New York Times. "Look at this article about investment clubs," she said. "We should start an investment club!"
I didn't have the foggiest notion of what an investment club was, and I didn't even know anyone who was investing in the stock market, besides in mutual funds in the company retirement plan. But I've always been a believer of the "learning by doing" approach, so it seemed natural to try to learn to invest while actually building a portfolio of stocks!
In the mean time, we began to talk to a select group of people in our office, to our friends, and to family members, to see who might be interested in joining our club. We organized a planning meeting at my apartment, and about 15 people said they would come.
The material provided in our Club Hub Learning Center outlined the steps we needed to take to start our club, from creating a partnership agreement and bylaws, to opening a bank and/or brokerage account, to electing officers, to developing a method to evaluate investments for our portfolio. We set our initial monthly dues at $20 per member (but allowing members to contribute more if they like), making it easy for just about anyone to be a member of our club if they had the interest. We followed the guidelines provided here, and in about three months we had formally established our club, the Blue Chip Posse, with 15 members. Our members included an architect, a theater manager, a computer analyst, an accountant, and an attorney -- men and women of all ages, occupations, races, and religions!
Our first task was education. Since we didn't have a clue about how to invest in the stock market, we spent our first several months teaching ourselves. Our Vice-President was in charge of education, so each month he presented a lesson about investing. You can learn all about investing, and gather insights from experts at stockcentral.com. In about six months, we were ready to buy our first stocks, and we purchased two stocks in dividend reinvestment plans (DRIPs) and one stock in our newly established brokerage account. We figured that if we were really committed to learning by doing, we shouldn't further delay buying our first stocks.
From that beginning, our club has built a portfolio that's worth about $35,000. We've had members come and go, but it's been exciting to see how all our members have learned from the experience of being in a club. Members are investing in their own brokerage accounts, making better decisions about their 401(k) plans, and getting their kids started in the stock market -- all because of what they've learned from being a member of the club.
When you're a member of an investment club, you're paying yourself first, since you must make your club dues each month. You're investing in the stock market for the long-term, reinvesting all your returns and letting your portfolio grow by compounding. By investing consistently in your club, you're taking advantage of the principles of dollar cost averaging, buying into the stock market whether it's high or low.
For the members of the Blue Chip Posse, building a portfolio of quality, long-term growth stocks has been a sensible part of our overall financial plan. But it's also been a fun and educational experience -- something you won't get from too many other investments!