The 9 Most Misunderstood Facts about Investment Clubs.
4. You need to be an expert economic mind to belong to an Investment Club. However, Investment Clubs are terrific places of learning owing to the networks they afford their members. More so, a Club with 12 members doing research is bound to provide a faster learning curve than what any one person could manage alone.
5. Entrance into an Investment Club is by invite only. This is not true for two reasons; one is that anyone can start an Investment club if they so desire, provided they can mobilize the quorum and subsequent funds for Investment, and stay diligent about educating themselves and partners about the market. Secondly, one can approach the board of the Club and ask to join the group. If there is unanimous agreement in the membership, they will welcome the new member.
6. Everyone is honest, and there’s no need for checks and balances. Even if you personally know everyone in the Club, it is a good idea to install some security measures so that one person cannot run off with everyone else’s money. Requiring two signatures on any check from a joint account is just one way of getting around this dilemma, or hiring professionals to manage the accounts. Finessed processes will dispel the myth that family and friends cannot be in business together.
7. The members always agree about where and how to invest. Club members usually disagree about investment choices, but this should not discourage anybody because constructive disagreement (discussion) yields a lot of good: helping the members understand the market and make the most educated decisions. Whatever, your area of expertise, there will likely be someone else who can challenge you or another that knows plenty more about a sector with which you are unfamiliar.
8. They are an unnecessary hassle because people are better off making investment decisions alone. This is not true. There certainly is a “group intelligence” that can emerge in well-organized investment clubs. One person might be an expert on precious metals, for example, while another knows the stock market quite well. Pooled intelligence is one of the critical advantages of investment clubs.
9. Investment clubs are all business. However, a significant selling point for Investment Clubs is that they also function as social organizations and can place their members within pretty enviable networks. Additionally, many Club members tend to have been social acquaintances or even friends before the Club’s formation. Meetings often happen in informal spaces like restaurants or church buildings. For people who like to get together with their friends and talk about the market, joining an investment club can be a great idea.