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Last Updated on April 16, 2021

How to start an investment club? The complete guide

Starting an investment group can seem like a profitable venture for most people. However, there are several grey areas to consider in this regard. While it is more like a conventional business, knowing how to start an investment club with all the right details, is still the best way to go about it. Just like successful clubs, certain important ground rules need to be applied before moving ahead to start one.

What Is An Investment Club?

An investment club is when a group of people comes together to form an organization for the sole purpose of investing their money together to realize potential financial benefits.

This group of people from the organization, become members, do things that will benefit all members while meeting regularly.

Why the primary objective of starting an investment club is to invest money. And make more money, there are still other benefits to realized from starting one.

An investment club can be an excellent way for members who invest their money to network, learn about various business opportunities, and be able to share ideas.

The cool thing about being a member of an investment club is the fact that it helps eliminate any type of financial loss anyhow.

In the case that the investment club ends up making a poor decision and gets burnt in the process. This risk is equally shared by every member of the organization.


The only grey area about starting an investment club is knowing how to start an investment club that will be successful.

If you start an investment club that ends up becoming successful. Then you will surprise at how many business opportunities you will realize with it.

Knowing how to start one of these clubs involving a thorough knowledge of being familiar with pooling funds from individual members and channel them to investing in the investment club for more profits.

The definitive guide to how to start an investment club

People often ask, “How does an investment club work ?.” If you know how to start an investment club then you are already halfway on your road to becoming financially independent from this business plan.

While most people are very familiar with the concept of how to start an investment club. And still other people lack a basic idea of the process.

If you are one of the few who seem to lack a basic idea of the concept of an investment club.

This is a definitive guide to know how to start an investment club. If you know how to start an investment club, you will know that there are different stages involved in the process.

It is quite similar to starting a new business, only that this is one with members, no customers.

And there is a continuous meeting of members regularly to discuss the direction of the organization.

The steps to starting an investment club

1). Create an objective

Individual investors begin various organisations that have different styles, investment clubs are no different. If you want your investment club to be a successful one irrespective of the number of members, is its investment objectives, its strategy, and its philosophy.

When you finally start one, ensure that all members are all on a page. Avoid conflicting objectives like some members wanting to invest in penny stocks that have high risk.

Whereas others are looking to put their money in blue-chip companies. The priorities when you start an investment club is to agree on what should achieve and set out the guidelines that will help you take you there.

If you are deciding on what the aim of your investment club should be, it might as well be to make a profit.

However, it will be of tremendous benefit to the members of the includes other objectives on education and enriching the financial knowledge of all members.

You should not be very preoccupied with making a lot of money with your company most especially when you have just begun investing.

If you focus on money-making you could lose out on the long-term goal of the business opportunity.

Clubs that prioritize enhancing the financial literacy of their members, usually see that profits come after that. It is all about putting the horse before the cart and not the other way round.

Then again, you should understand that the objective(s) of your investment club and your strategy might change with time.

This usually happens as the members become old. Moreover with time the financial commitments or status of the members might change as they become old and retire. Even when new members get into the investment club, the objectives will still change.

2). Create a strategy

After creating a suitable investment goal, your next meeting should be all about creating a clear investment strategy.

Which will come with several rules/regulations or limitations to the investment portfolio of the investment club.

During your meeting for creating the strategy, you should decide whether you will be needing an “investment portfolio”, a “trading portfolio” or a mixture of both.

Your investment club may decide to have particular specifications or rules concerning their portfolio to make certain that there is always a reasonable level of diversification.

When you have an investment philosophy that has been pre-defined, this will make certain that there is an agreement between all members. And not just agreement on things involving share selection.

But with the processes that are follow in the execution of decisions.

During your meeting to create a strategy, you should always remember to concentrate on the long-term benefits instead of thinking about what the instant benefits will be.

You could use the following points when meeting to lay down the foundation.

The strategy of your investment club:

  • Despite when the market conditions tend to look gloomy. The members should commit to setting amounts of money regularly of the meeting which is usually monthly.
  • You should know to reinvest your capital gains and dividends. With compound interest, the money that you invest will grow more rapidly.
  • Within your first three years of existence, you should allocate most of your money to an investment that allows you to buy and hold. A less amount of money should be allocated to trading with the money in a different account.
  • Get companies with turnovers that are growing at a much rapid rate than the standard of the industry. Growth shares typically yield a better possibility for bigger dividends and sustained growth.
  • Lower business risk through diversification – investing in various industries and companies of different sizes.

3). Looking for the right type of people

The key to starting a successful investment club is looking for the right members. The vision of the members has to be perfectly aligned with the investment philosophies and objectives of the organization.

This is one of the best investment club strategies that is to make sure that your new joint business venture stays around for a long time.

In the case that the members of the investment club fail to share in a similar investment ideology and philosophy of the organization.

The investment club might struggle to make some progress since there will be a conflict of interest. Of which will usually lead to disagreement and possibly physical altercation during every meeting.


Based on reliable sources, the suitable size of an investment group is between five and 20 members. Know that fewer members mean fewer people to share huge responsibilities and having to contribute more of your money.

On the other hand, if your investment club seems to have excess members, you could find it difficult to control the group. While you may find it difficult to do something effective for every meeting.

When looking for members, you should be on the lookout for the people that will have a long-term commitment to contributing to the club’s success and not charity cases and freeloaders.

The moment that you have brought together all the possible members.

You will then need them together to pitch in on the idea of beginning your investment club. You should try meeting in a relaxed and casual atmosphere and emphatically lay down your expectations and goals.

At this point, you might want to refrain from promising anything. You should make sure that the group knows and approves of the principles of the investment club.

If you are meeting possible new members during the introductory meeting, you must try to decipher whether you all share common investment club interests.

During the meeting, you should try to look for their commitment, discipline, and if they can be trusted to pay early.

While in the meeting, you should still consider several other points that you can discuss while agreeing on market research, organizing your records, and making huge decisions each time that this matters.

4). Setup the organizational structure for your investment club

As soon as you have inducted the right people as members for your new investment club, you will need to set up an organizational structure for it.

If you have a smaller investment club, then you are expected to have an informal structure. This grows into a more formal structure as the investment club grows.

It is always best to have a predefined structure to help you handle your monetary contributions transparently and professionally.

The setting up of the organizational structure of your investment club should let you do the following:

Deciding on the Directors of the investment club:

You will then decide on who gets to be the president, Treasurer, Vice-President, Secretary, and Assistant Treasurer.

You should appoint two or more people to look after the money of the investment club because you are dealing with money.

And you should also decide on how people get elected into positions and the tenure of each position.

Lots of clubs do a one-year tenure for each position, while others do longer terms. You will also have to decide on the roles and responsibilities of each person.

Deciding on the meeting place and time:

You will need to choose a very convenient time and place for your meetings. This meeting location and time has to be one that all members agree with.

You can decide to hold your meetings every month, more frequently, or less frequently. For instance, a certain popular investment club meets and invests every month.

Deciding on the rules of your investment club:

Your club should have its own basic rules. This is the right time to set it up.

For instance, you need to set down rules that guide your selling and buying, rules on handling payouts, and monetary distributions.

Your rules should also cover how to payout any one of your members when they quit the club.

How to onboard any new member looking to join the investment club, as well as how to finally disband the club.

While forming your club, you should have in mind that life changes and things happen.

Therefore, it will be strategic and wise to plan for the demise of the club. These things have to plan very early beforehand to protect all the personal interests of the members of the club.

Deciding on keeping the record of the investment club:

At every point in time, each member will be curious as to know their equity percentage among the whole group contribution.

Your ability to give them the right and truthful information will tell how well you keep your records.

You should ensure to keep accurate records of the group’s financial contributions and the percentage equity of each member at all times.

Also, you will need to decide on the best way that you plan to achieve this as well as how you intend to communicate this information to the other members of the investment club.

You could get the Google Spreadsheet to help visualize the contribution of everyone in the group. This can even be shared with everyone in the group.

From meeting regularly to creating initial little contributions that will end up growing into a lot of wealth very soon. There needs to be a legal structure created for your club.

The moment that you have created a legal structure, you should be able to get a brokerage account for the investment club.

From a legal perspective, the investment club is seen as a legal partnership or a Limited Liability Company (LLC).

With these given structures the members of the company are seen as the joint owners of the enterprise.

Thus, their regular financial contributions may now be organized with the use of standard rules of accounting.

This way, the easiest structure to use is the general partnership. To this end, it is fairly simple to set up a partnership with your investment club.

You get to follow these easy steps that are involve like:

  • Registering the name of your investment clubs
  • Obtaining the club’s EIN
  • Creating and signing up the agreement for the partnership (you could get a lawyer for this regard).

All the income from this general partnership gets equally on an annual basis among the members of the investment club.

However, in this regard, one essential thing to check is to have excellent accounting records.

Since not all members need to contribute an equal amount of money, neither will be members for the same time.

Therefore, the investment club should have a clear method of finding the share of each member at any point in time.

Since the members will want to get back their money from their total contribution of the assets of the investment club.

Due to this, there needs to be an agreement on straightforward rules in relationship to penalties as it pertains to people who withdraw their contribution early.

6). Opening a brokerage account for the investment club

To get a brokerage account, the investment club usually opens an account by using the name of the investment club, as establish by its legal name.

This means that you will be expected to show copies of the club’s legal agreements and the (Employer Identification Number)EIN.

7). Define the contributions of each member

For your club to begin getting the money you will need to define the monetary payments that each member of the group is expect to invest in the club.

The amount that each member is investing in the club is defined by a certain amount.

All the club members might agree to invest the same amount of money. Then again, you will need to define the frequency of payments. Your members might decide to invest every month, quarter, or year.

Summarily all the club members might just decide to invest a certain amount of money every month for an agreed time which could be either short-term, medium-term, or long-term.

In terms of investing, all members of the group are not necessarily need to invest the same amount of money.

The stake or ownership in the club of any given member can calculate by the amount of money that has invested. All the members need to agree on a date for them to begin investing.

To invest, a member can just transfer their money to the official bank account of the club. This account should be opened for the sole purpose of investing in the club.