Do you feel the only way to play the stock market is with loads of money?  Or, do you feel you do not know enough to make decisions on your own, but do not want to rely solely on a broker?  One solution to these problems is an Investment Club. 

Investment clubs are a great way to pool resources and learn about investing. Absolute beginners to the stock market can join or form a club and develop a methodology for investing. In the past five years, investment clubs have enjoyed unprecedented growth in the United States. The number of clubs that are members of the National Association of Investors Corp. (NAIC) has tripled since 1993, and there appears to be no slow-down in sight.  

An investment club is a group of people who pool their money to make investments.   The individual investor joins the other members; the group researches different opportunities; and they buy or sell based on a majority decision.  

As with anything involving personal finances, make sure you know what you are doing before committing any of your money. Investment clubs usually do not have to register with the SEC. But, since each investment club is unique, each club should decide if it needs to register and comply with securities laws.  

Two securities laws which may apply are:  

• The Securities Act of 1933, under which membership interests in the investment club may be securities. If so, the offer and sale of membership interests could be subject to Federal regulation.  

• The Investment Company Act of 1940, under which an investment club may be an investment company, and regulated.  

Most investment clubs are organized as general partnerships. They are the easiest and most economical entities to form, operate, and maintain. The club's income or losses are "passed through" to its partners and are reported on their individual tax returns. Although partners may be personally liable for the debts of a partnership, a successful investment club should not incur obligations that exceed club assets.  

Members of investment clubs vote on administrative matters and whether to buy or sell stocks. There are two common voting methods:  

• One member, one vote; or  

• A weighted vote based on ownership percentages.  

A weighted vote is accomplished by each member voting their percentage of ownership of the club's assets. If we assume that the club's assets total $20,000.00. Member A's capital account is $1,000.00. Member B's capital account is $2,000.00. Member A has 5% of the voting power and Member B has 10%. The waited vote is the recommended method, however, the members of a club should decide which is best for them and specify that method in their partnership agreement. 

Now that we perked your interest in investment clubs, you may be asking, “how do I join one?”  Two options are available to you; you can join an existing club or form a new one.   

InvestorsGuide.com provides a listing of investment clubs sorted by state.  And, Investorama provides a list of investment club web sites, also sorted by state.  

If you wish to look into starting a new club, the NAIC offers thorough information on forming a club.