Investing in the stock market is easier when sharing investing ideas and pooling assets as part of a stock investment club. This article will show you how to get started!
How to Start a Stock Investment Club Online
By:June 18, 2020
Investing in the stock market is easier when sharing investing ideas and pooling assets as part of an investment club.
Starting your own club these days is easier and quicker than ever! There are only a few steps that require a paper submission, everything else can be done online. The following steps and accompanying resources will help you get started.
Step 1: Find Potential Members and Hold Your First Club Meeting
Search for like-minded people who have the same interest and desire about investing in stocks. Take the extra time up front to find the right mix of people who you believe can come together, organize as a club and manage a profitable portfolio of stocks. All club members should be aligned on a single stock-investing methodology.
To help ensure success, adopt the BetterInvesting stock investing methodology that has been in use for 70 years and that has helped more than 5 million people become successful stock investors. BetterInvesting’s methodology is simple to learn, easy to use and geared toward every experience level.
Email the sample meeting invitation to your prospective club members (see Resources listed below) to get things moving. The first few club meetings will be organizational in nature. During these meetings, the roster of investment club members is established, club officers are elected, and the club startup activities needed for the future should be addressed.
Schedule these initial meetings every two weeks to keep the process moving. Aim for a total of four organizational meetings to get your club up and running. Monthly meetings should be scheduled moving forward.
Online meetings are a convenient way to hold meetings. Some providers of free online meeting applications include Google Meet, Zoom and Skype.
Important! Keep moving forward by using the Investment Club Start-up Check List.
Resources:
- Investment Club Start-up Check List
- Sample Meeting Invitation
- Duties of the Officers
- Learn About Investment Clubs
Step 2: Form a Legal Business Entity and Get Organized
Now you need to organize your club as a legal business entity. To determine which type of legal “business entity” is best for you, carefully review the Types of Business Entities document (see Resources listed below). Most clubs prefer general partnerships because of the extremely low liability issues associated with a club. Additional benefits include allowing the club’s tax liability to pass through to the partners’ personal tax returns and the advantage of this as the least expensive legal structure.
There is no paperwork to file with a general partnership itself. Since your club will most likely name itself something other than the personal names of the owners, you will need to file a “DBA” (doing business as) certificate with the county where the business is located. Certificate filing requirements vary from state to state so your club secretary or treasurer will need to contact your Secretary of State’s office or licensing board, as well as the office of your local county clerk for details. Online filing is not always available.
BetterInvesting clubs typically adopt the general partnership agreement and operating procedures developed by the Mutual Investment Club of Detroit — one of the organization’s founding clubs. We suggest using these documents to get your club started and operating at a high level. Changes can be made without difficulty in the future if the need arises.
You’ll also need an Employer Identification Number (EIN) number for your partnership tax filing, bank account and brokerage firm. Filing is quick and easy. Go to www.irs.gov and apply for your EIN online using IRS form SS-4.
Resources:
- Types of Business Entities Legal
- legalzoom.com
- I.R.S. Form SS-4
- Sample Partnership Agreement
- Sample Operating Procedures
- Learn About Investment Clubs
Step 3: Open a Brokerage Account and Bank Account
In this step you need to determine where you will manage your stock holdings, execute your trades, and whether or not a checking account is needed. Your club should strive to keep costs associated with your stock investing activity to a minimum in order to maximize your returns. The brokerage company you choose will play a significant role.
Depending on your preference, you may want to open a checking account in the club’s name to conduct some of the club’s financial transactions. Research the various types of banks and choose what’s in the best interest of the club. Many banks allow for direct deposit (electronic fund transfers), making it convenient and paperless for members.
Step 4: Join BetterInvesting and Acquire Your Stock Investing Strategy
BetterInvesting investment club registration and club member enrollment is the next step to forming your club. With BetterInvesting membership your club can tap into all of our resources used for starting and operating a club, draw on support from our staff and volunteer community, and use our quality tools and resources for studying investing ideas and making investment decisions.
Building investment knowledge and experience is the ultimate key to long-term stock investing success for you and your club. By learning the BetterInvesting stock selection methodology and how to apply it using the BetterInvesting online stock selection tools, your club will be on the path to creating and managing a profitable stock portfolio.
Resources:
Step 5: Establish Club Accounting Procedures
Investment club accounting is a critical component of operating a successful stock investment club. The club accounting system BetterInvesting developed has been time-tested and trusted by thousands of clubs operating as partnerships. The club treasurer is ultimately responsible for club recordkeeping. However, it is highly recommended that every club member become somewhat familiar with the process, which is easy to do using the myICLUB.com online club accounting and portfolio management platform.
myICLUB.com is the accounting and club management platform of choice for the majority of U.S. investment clubs. myICLUB.com offers a robust and all-inclusive partnership accounting engine, along with a growing suite of tools for portfolio management and club operations.
Resources:
It's better to invest together!
Investment clubs are a safe and supportive way to learn BetterInvesting’s logical and time-tested stock-investing methodology and principles with your friends and family. BetterInvesting is a non-profit organization providing 70 years of experience and the resources you need to help you and your club invest profitably together.
Dennis Genord, Director, Education and Chapter Relations, BetterInvesting
Dennis Genord has been a BetterInvesting member for 25 years as a partner in three different investment clubs. He also leads organizational efforts to develop and deliver in-person and online investment education to BetterInvesting members and investment clubs. He helped develop the Building Wealth Curriculum that focuses on financial literacy and fundamental investment education, and he continues supporting teachers using the curriculum in high schools across the nation.
