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How to set up an investment club

An investment club is a group of people who pool their money to make investments. Indeed, the group decides to buy, manage, create, or sell any asset based on a majority vote of the members. Even though, members decide to actively participate in the day to day operations of the investment club or to simply be passive investors. That being said, do it with people you trust.

Takeaways:


Investment club enables investors to pool their money together into one professionally managed investment. However, with investment clubs, members invest their own money and act as the management team.


Forming or Joining an Investment Club

  • Form a legal entity, such as a partnership or Limited Liability Company (LLC). Since, you want to make sure financial contributions follow standard accounting rules.
  •  No real minimum or legal limit for membership. But, one club usually consists of 10 to 20 members.
  • To join the investment club, a new member will usually contribute a lump sum. Then pay a pre-agreed amount, every time they meet.
  • Members will normally meet periodically, such as once per month, to discuss investment opportunities.
  • Work with a credible investment professional or a brokerage firm.
  • Always make sure you have absolute trust in all members. Therefore, do your research. Eventually, hire a professional to get a better assessment of all members.

Advantages of setting up or joining an investment club.

  • Growing wealth: The club is a wonderful way to start, grow, or build wealth.
  • Social connection: reinforces social connections among members.
  • Opportunity for all: no prior requirement.
  • Education and knowledge sharing play a big part.
  • Investment clubs are recognized by the Securities and Exchange Commission.

Q&A


SEC: Securities and Exchange Commission,

The U.S. Securities and Exchange Commission (SEC) is an independent federal government agency responsible for protecting investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital formation. It was created by Congress in 1934 as the first federal regulator of the securities markets. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States.

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