Steps to Starting An Investment Club

1. Begin With the Right People
2. Establish Your Club Size
3. Set Your Contribution Amounts
4. Determine the Format of Your Meetings
5. Determine the Frequency of Your Meetings
6. Form A Partnership
7. Choose An Investment Philosophy
8. Set Up A Message Board

1. Begin With The Right People

The most important thing in starting an investment club is to start with the right people from the beginning. If not well thought out, it could quite possibly be the beginning of the end. The last thing you want is someone who says 'yes' to be in your club only because it was you who asked them. You want people who are interested in investing, interested in learning about the market, if not downright excited. You also want people that are like you and easy to get along with. You need to be able to ask questions and feel comfortable doing so with these people. From the silly question to the intelligent, who better than your friends?

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2. Establish Your Club Size

A good amount would be 7-12. You want to have enough people for there to be a decent amount of money to invest collectively to have it worth your while. You also would like to have enough able bodies to share the workload, but if you get too many, it gets impersonal. The Chicks have 10 women. Ten is not too big and not too small. "It's just right," said Baby Bear Chick.

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3. Set Your Contribution Amounts

There are two ways to approach this. (a) All contribute an equal amount each month or (b) Contribute different amounts each month depending on each individual's choice. We recommend starting with small, equal amounts. Use the investment club as a means of educating yourselves, then as a source of investing. Our club started out with $50 a month and 2 years later, we're still each investing $50 per month. (We do our own investing on the side, using our new Chick knowledge.) However, if your club decides to go with more money, just make sure everyone is in agreement with the amount and is able to afford the monthly dues.

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4. Determine the Format of Your Meetings

Do you want your meetings to be on-line or face to face? I'm guessing if you're at our website, you're already on-line and thinking it's a good medium. (Smart Chicky). Discuss with your club if you want to conduct your meetings online, or would you prefer to see each other once a month? From our experience, an on-line club is more efficient, but we can't live without the social interaction so we get together twice a year (for a weekend).

Things get done faster when you're all online, and you're able to have a record of everything that is said within the club. It's important to be aware which members are online, who is going to get online, who needs help getting online, and those who don't think they will ever get online. There is room for everyone in the club, no need to discriminate against the computer illiterates, YET. If after two years they still haven't bothered to figure out how to log on, drag their hiney down to the public library and introduce them to the free Internet service. Really I don't want to discourage you if you decide to meet face-to-face, just try to make it a goal to get your whole club on-line.

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5. Determine the Frequency of Your Meetings

First, you have to decide how often you are going to meet face-to-face, if ever. The first get-together is always best in a face-to-face place, after that...it's up to you. Our club chose to meet face-to-face twice a year. Whether you have an on-line or a face-to-face club depends on how often you should meet. We recommend meeting once a month for an on-line club...but if you're all in the same city, maybe an every other month on-line meeting. (Again, the social part will keep you interested.)

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6. Form A Partnership

Becoming a partnership is easy. Three steps at most. All your club needs to do is

1. File for an Employer Identification Number (EIN, see sample). You can do this by filling out an SS4 Form [Click here to download from the IRS site.] and then calling the IRS at 1-800-829-3676. You are able to get your EIN immediately if you fax them the form within 24 hours!
2. Get everyone in your club to sign a copy of your approved Operating Procedures. [Click here to link to the Chicks Operating Procedures.] Use them as a guideline, but customize yours to your own club.
3. The last thing your club might need to do is file with your county clerk. Every State is different. Some counties require that you fill out a Certificate of Co-Partnership and register your club's name. It's a quick call to your county clerk and you are on your way!

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7. Choose An Investment Philosophy

In all the clubs that the Chicks have helped to start, this step has required the most discussion. "How should we invest?" "What is a philosophy?" "How can we form an investment philosophy when we don't know how to invest?" Voila...The Chicks Dozen. The Chicks Dozen is twelve simple steps used as benchmarks in helping you to determine which companies are strong stocks and which ones aren't so able-bodied. This is only what the Chicks use, and isn't the be-all, end-all method to getting into the stock market, but it's simple, and we've had some success.

What is the be-all-end-all step in starting an investment club is formulating and accepting a philosophy. Every club must have a philosophy and stick to it. Everyone must vote. If your philosophy is, "We will only buy stocks in companies that start with the letter Y, then don't even look at Microsoft or General Motors." This will eliminate "hot tips" from the neighbor, or dart throwing.

I recommend using The Chicks Dozen Philosophy. (At least in the first year, then tweak as you learn more.) Check it out and see if it works as well for your group. However, if you want more knowledge, you can read our book, or anything written by Peter Lynch, Warren Buffet or any of the Motley Fool books are great places to start the conversation. Maybe someone in your club has read something else they found informative. All of these will help you decide on an investment philosophy. Remember, don't start investing until your club has decided what their philosophy is going to be. Take your time on this step.

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8. Set Up A Message Board

A HUGE aid in starting your club will to be to keep all communication moving. You need a place where you can type a message (or post a message) to everyone in the club and it can stay there for all to read. Then everyone in your club can respond at their leisure. This eliminates bulk emailing or people saying they never got the email. A message board works something like this:

Sister Chickies - Is everyone coming to my house for the Christmas Gift Exchange party/Investment Club meeting? Love, Jeannie

Jeannie et al - I'll be there. I'm bringing my report on Adobe and some spinach dip with chips. Peace, Sandi

Jeannie and Sister Chickies- I'll be ten minutes late, I have to get gas, and I have to stop at the bank first to get money to pay for the gas. I'll be there...but I don't have time to whip up a dessert or anything between work and there. These two jobs are killing me. But wait until you see my Secret Santa gift...(and my Mattel report).

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Click here to read some sample message boards »
Click here to start your own investment club's message board »