One of the ways that many younger people are getting the money to begin making money through stocks and other assets is through investment clubs. These groups were popular in the 1980s but lost a little steam during the dot com boom of the 90s when people thought the economy would stay on an upward swing. Now that things have settled down, people are beginning to return to more traditional investment vehicles, such as the stock market.
The concept behind the investment group is simple. One person (or couple) gets together and invites a number of others to join. Generally you will need at least 10 people or couples to join the group. You will need enough people that you can spread around the work for the group. Plus each person will be contributing a share of the money, so you need to know how much each person can spend to help decide how many people to ask. The group should not be too large, however, as that can cause some issues as well because there will be too many people needed to make decisions for the group.
Once you have a group of people together, you will need to have an initial meeting. Someone will need to take charge of the group just for administrative purposes. This person will be responsible for putting together the meetings and calling everyone although he or she holds no additional share in the investment the group makes. The leader will get everyone together and explain how it works. Then everyone will have the opportunity to decide whether or not she wants to join the group. There is no need to decide immediately, but there should be some deadline.
The group then will decide on an investment plan. Some groups opt to purchase stocks. These groups will each pool a set amount of money initially. Let us say that you have 15 members, and each person will put in $100. Your group has $1,500 to invest in a stock. Most groups start by investing in a single stock. The group then meets each month and decides whether to keep the stock or sell and what to do with any profits. Over time, the group will make more money quickly because the larger investment amounts will allow for diversification.
Another type of investment club is the real estate investment plan. The group will purchase properties and then fix them to sell or rent them out. Some groups opt for all residential property, which is easier to get rid of but turns less of a profit. Commercial properties make more money but require a different skill in selling or leasing the units.
Investment group members will meet monthly or even quarterly at first depending on the level of their investment. Every person gets one vote. Investment clubs may set themselves up as a business and be required to do so if they will be renting or selling property. Someone in the group should be skilled at financial planning, and everyone should be familiar with the basic concepts to make the group work.
Investment clubs are a great way to spend time learning about something valuable and to make a little money in the process. Plus a lot of people are interested in investing but are unsure how to go about it. You may think that you do not have enough money to invest or that you will not make enough to cover your expenses. Investment clubs allow you to learn as you go. If you are not knowledgeable about all areas of finance when you begin, then you will be able to allow others to take a more active role while you learn. Plus you will be able to take the risk with others, which may make it more palatable for you.
Investment clubs do come with some risk, of course. Your club may not take off, and you may find yourself losing money on the scheme. Most clubs will take two years or so to begin to turn good profits, and even then much of it will be in the form of assets and not cash. Still these clubs are a great investment if you can do it.
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