In Focus

How Much Per Month?

Note: This article focuses on Step 3 of Starting An Investment Club. For articles focusing on other Steps, see the links at the bottom of the page.

Did the title make you a little nervous? How much per month? Did it remind you of sitting in church on that one Sunday every year where you get a financial "talking to"? You know the one. The "We all need to be serious about tithing" sermon. I call it the money report of the church, or the "Cough-Up-10%-Sweats". Ten percent of your income -- and no less-- should be given to the church. Somehow I never manage to miss this particular Sunday. Believe me, if I knew it was coming, I would play hooky. There I go, ready for some spiritual rejuvenation and I'm hit in the pocket-book. Ouch.

Ministers everywhere are calling for my be-heading right now. (Ministers wouldn't really do that, would they? Phew.) But, it's the only Sunday that seems to be a little squirmy for everyone. No one really likes to talk about money. Money and "how much" are an awkward pair... especially coming out of the mouths of women. Well, guess what? Our topic today is How Much Per Month. Don't cringe: I promise it won't hurt.

Like I said, nobody is really comfortable about fessing up to how much they can -- and can't -- afford each month. Even though the money is an investment, it also falls under a person's expenses. One hundred dollars out of pocket every month could put a serious dent in your checkbook. How do you let the club know what is the most comfortable amount for you, and how can the club decide on an equal amount for its members? Did I say equal?

My recommendation for a club just starting out is to have all the members contribute the same amount of money. I think I mentioned in yesterday's article that it's important to keep things simple. (How could you forget the "easily divisible" line?) If everyone contributes an equal amount, it keeps it simple for the treasurer, keeps it simple for the investor, and it keeps it simple when April 15th rolls around. When your members become better acquainted with the whole process of being in a club and what it entails, then you can talk about changing to unequal contribution amounts. But that's later.

What your club needs to discuss before anything else is the 1% Broker Fee Rule. No more than 1% of the amount you have to invest should be spent on broker's fees. Brokers will charge you a transaction fee every time you buy a stock. Since the average discount broker fee is $15.00, you would want to have at least $1500 to invest each time. (1% of 1500 = $15.00) If you find someone who charges less, you can earmark less; if your broker charges more. well, you get the idea. Here's how we figure it: We have ten women in our club, each investing $50 a month. We accrue $500 each month and $1500 every three months. We buy a stock every three months. We are not able to buy any sooner as we don't have enough money to cover the 1% Broker Fee Rule.

Okay, I can hear you all out there in cyberspace asking: So how much Chick Karin??? How much should we invest?