Investment clubs and trading groups

R

Rumblefish

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I'm thinking about starting an investment club or trading group.

Is it worth a trader or investors time to participating in investment club or trading group?

What are the cons and pros of bothering with investment club or trading group?

Some brokers have a investment club account.


Investment clubs and trading groups were the origins of hedge funds and mutual funds but investment clubs and trading groups are private and very small under 49 member, imo.
 
Like with most clubs it's mostly networking opportunity. You can hook up with like-minded people, exchange ideas, perhaps, make friends.

Meeting people who are passionate about the field you have interest in can be highly motivating.

If you are interested in co-investing with other people, the main benefit is due to shere size you can get deals as single trader or investor can't afford. As a group it's easier to negotiate commission discounts with a broker or getting a good price on less liquid instruments like corporate bonds.

The downside is naturally the risk where other people decisions can affect your financial position. Further, some investment ideas gain value from being shared (more people buy a stock and price increases) while other ones loose value.
 
I would be interested in this. Currently I trade futures, but would like to start hedging risk with equities. We can create a group on skype if anyone is interested?
 
The only reason is to reduce trading fee and commission cost and share research etc.

It's a business relationship and there are lots of legal contract involved when opening an investment club account.

Has anyone been in a investment club?

Quote from LeeD:

Like with most clubs it's mostly networking opportunity. You can hook up with like-minded people, exchange ideas, perhaps, make friends.

Meeting people who are passionate about the field you have interest in can be highly motivating.
More...
 
Some of my friends wanted to start investment club account but after I learned how much capital they want to invest in it I quickly lost interest.
 
It's writing the charter and registering as a business that is complicated.

The information says the club should have only 5-15 members.

***An investment club should have around 4-15 members, any more than this and it will need a lot more work to administrate and keep flowing properly. ******

I'm just soliciting feedback regarding investment club experiences whether it's worth it.

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Perhaps normal membership in an investment club doesn't appeal to you as much as the thought of running one. Or maybe, just maybe, there are no clubs in your area and you want to change that as soon as possible. Never fear, however daunting the task may be, we're here to help with step-by-step advice. It's actually not that difficult to start an investment club. What's more, it's a fun way to learn about finances, and you can let your kids participate in -- or at least watch -- the excitement of increasing or decreasing group holdings.

Talk To Your Friends

If you speak to your friends and family who have an interest in the stock market, you may gain more membership. Just be careful not to let it interfere with your relationships, since major losses can be a strain.

Research The Laws

Before you do anything at all, you'll need to hit the books, so to speak. Research state and local laws regarding gatherings of people and, of course, investment in general. It is definitely a good idea to look in to federal laws as well, especially if you plan on having a large investment club, or if you or another individual member of your proposed investment club is worth $25 million or more in assets.

Write A Charter

A charter or a mission statement will outline clearly the group's goals, which you and your members should agree on before you even convene as an official investment club.

Be sure that everyone agrees with and signs your charter, which should include criteria for gaining new members, managing pay if there are significant investment gains, how frequently you meet, and how much each person's contribution should be. Be sure that you outline individual roles and limit the function of each role so that you can avoid the problem of one person having too much power. ****Mutiny ****in an investment club is not unheard of if the charter is not well-written, and these people can get away with loopholes in the contract.

Of course, make sure that you all sign it! This gives you an official record of original membership and makes it a binding document. You may even want to have the charter signature sheet notarized.

Finally...

Make sure that you register as a business. You can operate very simply as a Limited Partnership, which in taxes is represented as a single group. Speak with a CPA about attaching Schedule K to your taxes...so that an audit isn't in your immediate future!

Best of luck.
Quote from LeeD:

I presume you have already read through http://www.investmentclubhelp.com/
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Quote from LeeD:

Like with most clubs it's mostly networking opportunity. You can hook up with like-minded people, exchange ideas, perhaps, make friends.
Meeting people who are passionate about the field you have interest in can be highly motivating.
More...
Elitetrader has Hook-up forum where members can meet and arrange meetings.
 
Quote from Rumblefish:

Has anyone been in a investment club?
More...

Uh, yeah. The bastards wouldn't touch a stock with a P/E > 30.
One of my favorite quotes from the club, "It's already at a 52-week high, how much higher can it go?" This was ESRX, up 500% since then. They held LU and CSCO through the 2000-02 bear. At one meeting someone proclaimed PFE to be the best stock of the last decade. Every suckin' meeting I had to hear about their damned pipeline.

It might pay to start one from scratch with like-minded people, but I would be VERY wary of putting up money.

YMMV
 
I'm talking a 'professional' investment club and 'professional' trading group.

I assume all are business MBA, CFA, CTA, and profitable trading records. and all have more than 5 years of profitable trading and investment experience.

The group that you had was probably a bunch of housewives and weekend retireess 'chatting' about their 401K or employee investment clubs in companies who chat about their stock options etc. These groups are more to socialize than to make money.

Quote from _PD_:

Uh, yeah. The bastards wouldn't touch a stock with a P/E > 30.
One of my favorite quotes from the club, "It's already at a 52-week high, how much higher can it go?" This was ESRX, up 500% since then. They held LU and CSCO through the 2000-02 bear. At one meeting someone proclaimed PFE to be the best stock of the last decade. Every suckin' meeting I had to hear about their damned pipeline.

It might pay to start one from scratch with like-minded people, but I would be VERY wary of putting up money.

YMMV
More...
 
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