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Starting and Running a Profitable Investment Club


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Starting and Running a Profitable Investment Club

  1. 1. Starting and Running a Profitable Investment Club <ul><li>Sunday May 21 st 2000 </li></ul>
  2. 2. What is an Investment Club? <ul><li>Group of like-minded people interested in investing in the stock market . </li></ul><ul><ul><li>10-25 enthusiastic people </li></ul></ul><ul><ul><li>Agree to a few basic investing goals and principles </li></ul></ul><ul><ul><li>Meet regularly </li></ul></ul>
  3. 3. N ational A ssociation of I nvestors C orporation <ul><ul><li>Non-profit organization focused on providing sound investment information, education and support to both individuals and clubs </li></ul></ul><ul><ul><li>Formed in 1951 </li></ul></ul><ul><ul><li>Proven investment philosophy </li></ul></ul>
  4. 4. Investment Philosophy <ul><li>Invest a set amount regularly, usually once a month, regardless of market conditions. </li></ul><ul><li>Reinvest all dividends and capital gains. </li></ul><ul><li>Buy growth stocks - companies whose sales are increasing at a rate faster than industry in general. </li></ul><ul><li>Diversify your portfolio - invest in different industries and different size companies. </li></ul>
  5. 5. Membership <ul><li>NAIC's membership - 730,000 individual and investment club members </li></ul><ul><li>Investment clubs - 37,129 clubs </li></ul><ul><li>Individuals - 55,597 members </li></ul>
  6. 6. Membership Facts <ul><li>67% are female and 33% are male </li></ul><ul><li>Median age of NAIC members is 50 years </li></ul><ul><li>Average investment club age is 4 1/2 years </li></ul>
  7. 7. Why the Stock Market? 1926-1994 Study from Ibbotson Associates
  8. 8. Why Invest? <ul><li>Children’s Education </li></ul><ul><li>Home </li></ul><ul><li>Car </li></ul><ul><li>Travel / Vacation </li></ul><ul><li>Retirement </li></ul><ul><li>Higher Quality of Life </li></ul>
  9. 9. Club Advantages <ul><li>Learn about the stock market without risking a large sum of your own money </li></ul><ul><li>Each member brings their personal experience and knowledge to the group </li></ul><ul><li>Chance to meet new people and get together with old friends </li></ul><ul><li>Structure </li></ul><ul><li>Discipline </li></ul><ul><li>Minimizes Emotional Decisions </li></ul>
  10. 10. Club Mission <ul><li>Education </li></ul><ul><li>Social / Networking </li></ul><ul><li>Profit </li></ul>
  11. 11. Club Expectations <ul><li>Most clubs report a loss during first year </li></ul><ul><ul><li>Dues are an investment in learning </li></ul></ul><ul><li>Most clubs stay even second year </li></ul><ul><ul><li>~40% fold during first two years </li></ul></ul><ul><li>By third year, most clubs post first earnings </li></ul><ul><ul><li>670,000 members Avg. Annual Return of 12% </li></ul></ul>
  12. 12. Club Structure <ul><li>Recommended to organize as Partnership </li></ul><ul><li>Agree on a Club name </li></ul><ul><li>Adopt a Partnership Agreement </li></ul><ul><li>Elect Officers (optional) </li></ul><ul><li>Committees </li></ul><ul><li>Monthly Meetings </li></ul><ul><li>Create operating procedures </li></ul><ul><li>Open account with brokerage service </li></ul><ul><ul><li>Ameritrade, E-Trade, Datek, etc. </li></ul></ul>
  13. 13. Club Officers <ul><li>Presiding Partner (President) </li></ul><ul><li>Assistant Presiding Partner (VP) </li></ul><ul><li>Recording Partner (Secretary) </li></ul><ul><li>Financial Partner (Treasurer) </li></ul>
  14. 14. Club Committees <ul><li>Education </li></ul><ul><li>Stock Selection </li></ul><ul><li>Hospitality </li></ul>
  15. 15. Club Principles <ul><li>Invest regularly, regardless of the market outlook </li></ul><ul><li>Reinvest ALL earnings </li></ul><ul><li>Invest in growth companies </li></ul><ul><li>Diversify to reduce risk </li></ul><ul><li>Long term commitment </li></ul>
  16. 16. Costs of starting an Investment Club <ul><li>NAIC Registration = $40 plus $14 per member </li></ul><ul><li>NAIC Club Accounting Software = $211 </li></ul><ul><li>Partnership Registration = $30 </li></ul><ul><li>Total startup costs will come from the initial contributions </li></ul><ul><li>The $14.00 membership fee includes a subscription to Better Investing® Magazine. </li></ul><ul><li>The Partnership Registration fees noted above will vary from State to State . </li></ul>
  17. 17. Club Start Up Activities <ul><li>IRS ID Number </li></ul><ul><li>Bank Account </li></ul><ul><li>Stock Broker </li></ul><ul><li>Acct. (NAIC) Software </li></ul><ul><li>Meeting Place </li></ul><ul><li>Meeting Time </li></ul><ul><li>Amounts to Invest </li></ul><ul><li>Assign Companies </li></ul><ul><li>Research Companies </li></ul><ul><li>Visit Stores </li></ul><ul><li>Decide on “Buys” </li></ul><ul><li>Invest </li></ul><ul><li>First Trade </li></ul>
  18. 18. Next Meeting <ul><li>Adopt Operation Agreement </li></ul><ul><li>Operating Procedures Details </li></ul><ul><li>Elect Officers </li></ul><ul><li>Individual Responsibility </li></ul><ul><li>Set Regular Meeting Date </li></ul><ul><li>Decide Amount of Monthly Deposit </li></ul><ul><li>Selecting a Broker </li></ul><ul><li>The Club Name </li></ul><ul><li>Join NAIC </li></ul><ul><li>Review NAIC's Official Guide </li></ul><ul><li>Start a Study Program </li></ul>