How to Find an Investment Club
To connect with other online investors, you might consider an investment club. Investment clubs are typically gatherings of investors in a certain geographic area who meet at a local restaurant or a member’s house to shoot the breeze. Members pitch stocks they think the group should buy or sell.
Investment clubs also have a bit of a party feeling to them, because they’re usually designed to be fun, educational, and, oh yeah, profitable. If your city doesn’t have an investment club, or if meeting with people in person doesn’t fit your schedule, a few online investment clubs are cropping up. Whether the club you’re interested in joining is held in the local Moose club or online, you may be required to buy in by adding money to a pool of cash.
If you’re interested in an investment club, here are several online ways to get started:
National Association of Investors Corporation: BetterInvesting is one of the top associations of investment clubs. BetterInvesting’s Web site lets you find investment clubs in your area. You can also take online classes to work on improving your investing success. And if no investment club is near you, you can find out how to start a club of your own or join an online investment club.
The Motley Fool: This site maintains a discussion board where investors in different states can find investment clubs. Just enter the discussion group for your state, called a Folly, and search the messages. You’ll likely find other investors in your states planning a meeting or talking about starting a club.
Bivio: If you’d like the friendly and personal nature of an investment club but don’t have time to attend monthly meetings, try Bivio, which offers a collection of online investment clubs. You can search through the club home pages and choose a club to join or even start your own.
Value Investors Club: This is a selective group of just 250 members who pick stocks. You must apply to be accepted, and if you get chosen, you must submit two stock picks a year.
Meetup.com: This site provides an online way for people with common interests to connect in person. People interested in investing often create meetings or “Meetups” and provide the time and location on the site.
Before you rush out and join an investment club, be aware of the potential drawbacks:
Bad decisions by others can cost you. If the loudmouthed guy in the club talks the group into buying a stinker, you’re going to take a bath, too.
They give an incentive to tinker. Many investment clubs consider themselves to be long-term investors, or shareholders who hang onto a stock for at least a year and usually much longer. But an investment club wouldn’t be much fun if the members never actually bought or sold anything. That means there’s somewhat of an incentive to be constantly buying or selling investments.
Compromise can hurt. Although nothing is wrong with agreement, having several people steering a portfolio sometimes means that there’s no single and coherent strategy.
Members’ investing skill levels can vary. Some investment club members are only there for the fun, food, and friends. That can leave much of the grunt work for the few members with the skill or desire to make money in the club.
Online Investing Glossary
60 percent margin requirement
The requirement that you must put up 60 cents of every $1 you invest.
Online Investing Glossary
annual report to shareholders
A document that contains all the required financial statements and information contained in the 10-Ks presented in a colorful format.
Online Investing Glossary
average daily share volume
The number of shares that usually trade hands in a given day.
Online Investing Glossary
balance sheet
A document that tells you what a company owns and what it owes.
Online Investing Glossary
bond
An IOU issued by a government, a company, or another borrower.
Online Investing Glossary
brokerage
A fee paid to a broker to handle investment transactions for you.
Online Investing Glossary
capital gains
Income you’ve made on the capital you’ve invested.
Online Investing Glossary
cash account
A brokerage account into which you deposit cold hard cash your broker uses to buy stocks for you.
Online Investing Glossary
commission
The price brokers charge for executing trades.
Online Investing Glossary
Consumer Price Index
The measure of how much prices for the things individuals buy are changing.
Online Investing Glossary
days to cover
The number of days it would take, on average, for the number of shares that are being shorted to trade.
Online Investing Glossary
diversifying
To spread your risk over a wide swath of investments.
Online Investing Glossary
dividend yield
The amount of return you’re getting in the form of a dividend, in other words, how big the dividend is relative to what you’ve invested.
Online Investing Glossary
dividends
Cash payments made by companies to their investors.
Online Investing Glossary
earnings reports
A document that tells you how much the company made during the quarter. Earnings reports also contain all the vital financial results for the quarter, including the net income (or total profit) as well as earnings per share, which is how much of the company’s profit you can lay claim to as a shareholder.
Online Investing Glossary
Exchange Traded Funds; ETFs
Groups of stocks, much like mutual funds, that trade like stocks.
Online Investing Glossary
geometric mean
The way to correctly measure stock return.
Online Investing Glossary
holding period
The length of time you hold a stock.
Online Investing Glossary
income statement
A document that outlines how much money a company made.
Online Investing Glossary
limit orders
Trades in which you set the price you’re willing to accept.
Online Investing Glossary
maintenance margin
The percentage of ownership of stocks relative to what has been borrowed (typically 30 percent or higher at most firms) most online brokers require investors to maintain.
Online Investing Glossary
margin account
An account type that lets you borrow money you can use to buy stocks.
Online Investing Glossary
mutual funds
Money collected from many investors and used to invest in a basket of assets.
Online Investing Glossary
number of shares outstanding
The number of shares that are in the hands of investors.
Online Investing Glossary
options
If you own an option, you have the right, but not the obligation, to buy or sell an investment, including shares of stock by a certain preset time in the future.
Online Investing Glossary
penny stocks
Stocks that trade for less than a dollar.
Online Investing Glossary
Producer Price Index
Tracks prices paid by companies that create goods. When prices are rising, both bond and stock investors pay attention because that affects the value of their investments. Stock investors typically don’t like inflation because it drives up costs and makes their investments worth less.
Online Investing Glossary
proxy statement
A document that describes company matters to be discussed and voted on by shareholders at the annual meeting.
Online Investing Glossary
shareholders’ equity
The difference between assets and liabilities is what portion of the company shareholders own, called.
Online Investing Glossary
short squeeze
What happens when the short sellers get nervous that a stock they’re betting against will rise and they rush out and buy the stock back so that they can return it to the brokers they borrowed it from.
Online Investing Glossary
taxable accounts
The standard accounts that come to mind when you think about investing online.
Online Investing Glossary
tax-advantaged accounts
Accounts that are sheltered in some way for some period or other from the Internal Revenue Service.
Online Investing Glossary
total return
The amount a stock has gone up plus its dividend.
Online Investing Glossary
turnover
The amount of buying and selling a fund does.
Online Investing Glossary
valuation ratios
An estimation a stock’s value computed by comparing the stock price with a measure taken from the company’s financial statements.
Online Investing Glossary
volume
A measure of how many times shares of a stock or ETF trade hands.
