The most important reason for choosing to be a part of an investment club is that you’re committed to discovering more about investing in the stock market and you’d prefer having a few other people join you on your journey. There’s safety in numbers, of course. If you know you’re not the only club member who’s clueless about price-earnings ratios or estimating future growth rates, you probably won’t be as self-conscious about asking questions and struggling to understand new investing concepts. Investment clubs offer you a number of specific benefits:
1. Perspectives: By their nature, investment clubs often inadvertently pull together people with diverse opinions of the world. That means a wide variety of perspectives adding to the mix when discussing the pros and cons of your monthly stock study, which benefits your club. When you listen to your fellow club members share their thoughts about a stock, regardless whether you agree with them, you’re gaining knowledge about how other people make judgments that you’d never get reading a book at home alone.
2. Safeguards: Sometimes, making decisions in a group keeps you from making mistakes when you’re buying and selling stocks. Convincing yourself that you’ve found the absolute best, most perfect, guaranteed-to-rise-in-price stock that’s come along in the history of the stock market is all too easy. In a club setting, however, your believing the stock will be a winner isn’t enough - your fellow club members must also be convinced. Frequently, someone else in the club finds a reason (or two or three) why the stock may not be such a terrific buy after all. The club’s collective brain often is smarter than the brain of an individual member.
3. Performance: The club approach seems to work well when it comes to investing in the market. According to annual surveys conducted by the National Association of Investors Corporation (NAIC) of the stocks most widely held by investment clubs, club holdings outperform the overall market.
4. Affordable: Another great benefit of investment clubs is that your minimum monthly membership contribution usually is relatively small. So, even if you’re living on a shoestring salary and can’t put away much money toward retirement, for example, you can probably afford $20 to $40 a month for club dues. You’re immediately putting that money to work for you, and someday when you have even more money to invest, you’ll be able to use the investing skills you develop with your club to build up your own personal portfolio
5. Purchasing power: By participating in an investment club, you’re pooling your small investment with those of many other people, enabling all to make investments you probably couldn’t make on your own, and keeping your commission costs much lower than if you’d been investing all by yourself. The higher the percentage your commissions are of the total amount invested, the less money you’re actually able to invest. If you don’t have thousands of dollars to start investing on your own, you usually can buy stock much more inexpensively on a percentage basis through an investment club than you can by yourself.