If you and your friends have thought about pooling your resources to create an investment club, then you should go for it. I’ve considered the idea but have, regretfully, failed to execute. Maybe it’s because I didn’t fully understand all of the benefits. Here are three reasons you should start your investment club.
Share the Wealth and the Risk
To begin with, you have access to more information and funding with lower risk because everything is shared. Let’s say you want to purchase an investment property that requires $20,000 down. You and three of your friends can contribute $5,000 each. Now, you have saved yourself the time it would take to save an additional $15,000 and the money itself. These savings also apply when you invest or trade the stock market. If you put equal amounts of cash in, the group will split the gains accordingly. If you experience failures, your share of the losses is smaller than if you invested alone.
Also, with active members of an investment club, you will have exposure to varied opportunities. The members, which I like to call “investor-friends,” will hear about different events or investments while at work, home, or traveling — the more diverse your group, the more information you can access. Additionally, you won’t be solely responsible for researching potential investments. Your investor-friends can find supplementary information you may have missed.
Accountability Partners
Next, an investment club has built-in accountability partners. Because the club is a legal entity, it is in everyone’s best interest to make smart choices. Your counterparts won’t let you make risky decisions without the proper due diligence. Also, you have to follow the charter or rules set in place when the group started. Thus, you’re also less likely to make rash, emotional decisions when you have to agree with others or get their approval.
For example, what if you want to spend the accumulated savings on cryptocurrency, but you’re basing the idea on hearsay. Your investor-friends will be there to research and talk through the investment. If it doesn’t add value to the club, it probably won’t be a good investment for everyone. However, you can always invest on your own with separate funds.
Build Up Your Community
Finally, investment clubs allow you and your partners to bring wealth to your families and communities. As your wealth increases, you’re able to spend more locally and support small businesses in your area. If you invest in commercial or residential real estate, you can increase property values and taxes in your area. As these values increase, cities can repair roads, schools can purchase supplies, and counties can improve public amenities.
If your group is geographically diverse, you can affect many areas at once. Your investment club could be the catalyst for advancements happening around the country. If you decide to share what you’re doing with others via social media, you’ll motivate others looking to start their clubs.
Wouldn’t it be amazing to see more investment clubs pop up throughout the nation? Investor-friends can renovate homes in the blighted neighborhoods in their neighborhoods. Additionally, they can use their profits to start businesses that support the local economy or donate a portion to their favorite charities. No matter how you invest, you can go further together.
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