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Investment clubs are quite popular these
days. In fact, even if you aren't in a
club yourself, the chances are pretty
good that you know someone who is.
Should you consider joining such a club?
There's no one "right"
answer for everyone, of course. But if
you do join an investment club, you will
find that there are both "pros" and
"cons" involved. Let's take a quick look
at a few of these.
The "pros"
·
Investment clubs can be fun. You can
learn about investments in countless
books, magazines and web sites - but you
may enjoy the learning process more by
joining an investment club. After all,
most of us are "social creatures" by
nature, so we like being with other
people. By discussing investments as
part of a group, you can gain a lot of
knowledge in a pleasant environment. And
some clubs even invite guest speakers
who are experts at a particular aspect
of investing.
·
Clubs provide an affordable way to
invest. There's no "standard"
contribution for investment clubs. Some
clubs ask for $50 a month from its
members, some clubs ask for $100, and
some may ask for even more. Find out
what the required amount is for the club
you're considering. And ask other
questions, too: Can you skip a month's
contribution and still stay in good
standing? Can you contribute more or
less than the designated amount?
·
Membership encourages investment
discipline. Many people lack discipline
when investing. If, for example, they
own a stock that is temporarily down,
they may quickly sell it, even though
the company still has good prospects.
But investment clubs, by their very
nature, tend to have a long-term focus.
Members are interested in following
investments over time, not buying and
selling at a frantic pace. And the most
successful investors are the ones who
hold quality investments for many years.
The "cons"
·
Clubs are limited in scope. Even the
most active club can only look at a tiny
fraction of the many investment
opportunities available. To build a
portfolio that can help meet all your
important financial goals, you have to
consider the entire spectrum of
investments. Consequently, you cannot
rely on your investment club exclusively
for your investment solutions.
·
Recommendations are not personalized.
Make sure that you're comfortable with a
club's investment philosophy and its
risk tolerance. For example, one club
might be willing to accept a higher
level of risk in exchange for
potentially greater returns. On the
other hand, another club may be more
conservative in nature. It's essential
that you choose a club with which you're
comfortable. But even when you find a
club whose approach to investing is
compatible with yours, keep in mind that
group decisions can never take the place
of recommendations tailored to your
individual needs - and you can only get
that type of guidance from a qualified,
experienced financial advisor.
Your membership in an
investment club can be enjoyable and
educational. So, if you decide to join a
club, make the most of it - but keep its
benefits in perspective. |
