Should You Join a Stock Investment Club?
Joining an Investment Group Might Be Right For You
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Joining a stock investment club could be a good way to get your feet wet in the investing world, but you should carefully weigh the pros and cons before you decide to commit your time and money to one. Stock investment clubs are formal organizations created to make investments in the stock market using capital funds pooled together by the club members. The clubs are often formed by groups of individuals who already have some common interest, such as working for the same company, or membership in another social organization or church. The investment decisions of the club are usually made by consensus of all of the members, but the details of decision-making will vary depending upon the rules governing the club's activities.
An advantage of participating in an investment club is being able to benefit from research and insights of other club members. Since you all have the common goal of increasing the value of the club's capital, there should be no conflicts of interest or unspoken motives between members. While doing your own research and developing your own trading philosophy is important, learning from others is also valuable. Your investment costs may also be lower by pooling your capital in a stock investment club. Lower commission rates and access to a wider range of investment vehicles are available to an account with more capital than you may be able to come up with alone.
Being forced to go along with the club's decisions is a big disadvantage to being in a stock investing club. Sometimes you may think you have insights into a particular company that your fellow members do not agree with, so you may feel pressured to go along with ideas you don't like, or the club may be unable to reach a consensus decision on a particular investment and be forced to stay on the sidelines.
If you prefer making your own decisions and not being hindered by the group mentality of an investment club, you may benefit from joining one or more online investment forums. An online forum is a discussion board that facilitates open communication among members who trade ideas and advice that is publicly visible. Most forums also have a means of private communication between members.
There are hundreds of trading forums online. Among the most active are Traderji, a forum based in India, which can offer unique market insights from a primarily Asian perspective, and Online Traders Forum. These are just two examples among many that are available online.
If you participate in an online forum (or individual stock message boards, such as you can find at finance.yahoo.com) you can find much useful information about trading products, software, brokers, and stock investments that might take you a lot longer to find on your own.
Be aware, though, that many posters in forums have underlying motives, such as promoting stocks in the hope of benefitting personally (either by direct payment from the company or from artificially driving demand for the stock up), and people sometimes claim expertise in areas they are not really expert in. As in all things related to your investment activities, use due diligence and filter your decisions using your own intelligence and investment strategy.
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