Investment clubs are groups of investors who pool in money to make joint investments in stocks and bonds. An investing club convenes meetings regularly for the exchange of investing ideas among like-minded people and to enhance knowledge to foster better decision making. These investment clubs also help to boost the buying power of their members.

Types of Investment Clubs

Investment clubs can be categorized into the following:

• Group Portfolio Clubs: Investment decisions are taken by all the members of the club after thorough research. All the members share their ideas and the club makes an investment only after reaching a consensus through a voting system. Members who are investing more money have a higher say in the decision making. Group portfolio clubs operate like mutual funds and offer an opportunity to new and small-scale investors to gain exposure to large investments. These clubs can save on taxes by structuring themselves as partnerships or limited liability firms.

• Self-Directed Investment Clubs: Members conduct regular meetings to share their ideas and views on investments. They also meet to discuss specific strategies.

Benefits of an Investment Club

Investment clubs have the following benefits:

• The members gain valuable information on and knowledge of investing diligently. The members usually come from diverse backgrounds and have different work profiles, exposure and expertise. These clubs offer each member an opportunity to learn something valuable about investing from others.

Investment clubs are an effective way to pool in money and build a diversified investment portfolio. An individual can benefit from the knowledge and experience of other investors. Moreover, an individual can share risks with other investors.