Guide to investment clubs
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An investment club is a group of individuals who join together to invest in the stock market. A club could be made up of families, neighbours, friends and colleagues at work. For many people, an investment club is their first experience of the stock market
A recent report found that around two-thirds of recent investment club recruits had never traded a share before joining the club.
The first investment clubs were set up in the UK in the 1950s and even as recently as 1995 it's reckoned that there were just 300 of them. Their numbers exploded in the late 1990s however and it's believed there are around 10,000 in existence. Each month, normally at meetings, members contribute a small sum of money that is deposited in a joint account. They take turns researching and reporting on promising companies in which they might invest or companies in which the club has already invested.
Successful investment clubs focus on learning as well as doing. There's often an education director elected and guest speakers invited. Club members seek to explore new ideas and discuss investing issues. One month a member might present her findings on the value of screening for low P/E shares. Another month, a member might report on a book he read about a great investor like Warren Buffett or Ben Graham.
In the early sessions of a club's life, education components might be very introductory, covering how to read a balance sheet or earnings report. A year or two later, the club might be learning new ways to value shares or discussing an interview published with a successful individual investor or influential businessman.
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