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The Benefits Of Using An Investing Club

Aug 17, 2007
If you are going to college or just sarting in your career, you might want to consider investing in the stork market for a little extra cash. It is important for young people to start investing wisely in order to secure their financial future. Investment clubs are a great way to learn the ropes until you can do everything on your own.

Not all investment clubs are created equal. The first is mainly concerned with teaching about investing and the concepts of the stock market. They use simulations rather than real money to illustrate the way that the stock market works. You can learn the principles before you put any of your hard earned money at risk.

Virtual investment clubs simulate actual trades and trading stocks. These virtual clubs are like an investing úschool.Ě There are several websites available for testing out stock market principles such as MarketWatch (TM)s Virtual Stock Exchange. The Virtual Stock Exchange performs market simulations.

Many universities are establishing virtual investment clubs for the purpose of teaching stock market strategies. It provides students with a familiarity for financial terms and the financial institutions available to help them.

Virtual investment clubs can also learn many things beyond investing to learn about the way the stock market works. Many clubs host investment relations representatives to make presentations at their meetings. Brokers are also excellent guests at club meetings for speaking about how brokerage firms work and networking with club members.

The second type of investment club is the type that actually puts forth money into the market. Their purpose is to pool the money of the group so the members have more leverage in the market than they would if they had invested individually. The investment clubs that actually put forth money form a legal partnership between the members so that each member is protected.

To start a legal investment club, each member fills out partnership agreements. The documents are available from the National Association of Investors Corporation (or NAIC), that is a non- profit organization. Belonging to the NAIC is also recommended because the organization provides special services. The NAIC charges $40 for the establishment of the club plus $14 per member, per year. There is NAIC Club Accounting Software available to keep everything in order for $159.

The investment club will then open a brokerage account with a firm of their choice and appoint a treasurer for the club. The treasurer will maintain and report tax information to each individual member so all members are well informed of what is going on with the clubs investment. This also allows each member to report their share of the club (TM)s earnings and pay their portion of taxes.

Investing with a club has several advantages. When you are part of an investment club, you are able to get different perspectives on a variety of stocks. Each investment is a group decision and this allows for a broader input on the stocks that are invested in. The club benefits from the variety of experiences and knowledge of the group. Each member gains a broader understanding of the market by hearing that stocks appeal to certain people. The investment club also allows investors to spread their money out over a variety of stocks and therefore, own a portion of many companies.

Most investment clubs have a dozen or more members, one treasurer, and one president to plan and arrange everything. A secretary is also helpful in taking minutes for the meetings. The other members of the club are responsible for researching and bringing information regarding different stocks. Most clubs meet once a month to discuss the investments and hear new stock investing ideas. An investing club is a great way to go about learning the ins and outs of investing in the stock market.
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