When you get your initial members together, it’s important to have the same investing goals for the club. Some of your initial members may want to jump in and out of stocks to make a fast buck. This is contrary to what an investment club should be.
Successful investment clubs buy and hold stocks for the long term. This is why mission statement for one of my clubs clearly states that we must perform a thorough stock study and gain approval of a majority of partners. By performing a stock study, or an analysis of each company we look at, we prevent someone from coming in and wanting the club to purchase a stock on a hot tip. Without a thorough stock study, there should be no vote on whether to purchase the stock or not.
Also, it’s important that the club members form and agree on a club mission statement. If your club members agree on a club mission statement from the outset, it will save a lot of club conflict in the future. Make sure you put it down on paper and vote it in as a club. You won’t regret it.
Here’s a sample statement:
“Our club is committed to educating its members about investing in the stock market and investing for the long term. Our investment objective is to double our money every five years. To do so, our club must average a
14.90 percent compounded annual growth rate.
“In order for a company to be considered for purchase by the club, a (Name of Club) Investment Club partner must show:
• A completed stock study for the company, as agreed upon by members.
• Majority approval by the partners to purchase said stock.”
If your club has a mission statement like the one above, things should go much smoother down the road.