The stock market can be a scary place, especially if you’ve never invested before. One solution is to create an investment group with a select number of friends and business partners so you aren’t alone in shouldering the burden. If you’re thinking of starting your own investment group, here are just a few steps for success.
You can’t do anything without members, so your first order of business should be recruitment. Try not to exceed 10-20 members during your first six months; any more than this and you’ll struggle to maintain order in your newly-established group. It’s also a good idea to have an odd number of members for votes and tiebreakers.
Once you have your investors, it’s time to sit down and figure out what you hope to accomplish as a group. Are you just trying to understand bonds and forex, or do you actually want to earn some money through them? If it’s the latter, what’s a realistic number for your first quarter? How much do you hope to earn by the end of the year?
As founder of the group, you’re the best candidate for president, though you might choose to pass the torch to someone you can trust. You’ll also need secretaries, treasurers and vice-presidents to form a clear chain of command in the event of trouble.
Talk About Contributions
Everyone should offer a certain sum, but how you determine those figures is up to you. Will everyone contribute the same dollar amount per month, or will you ask for a certain percentage in proportion to income? Will you be investing that money together as a group or through self-directed accounts?
File The Paperwork
The exact requirements will vary by state, but you’ll probably want to look into things like investment contracts and partnership agreements. You might also need to sign a “Certificate of Conducting Business as Partners” under an official EIN. For more information, contact a broker or investment firm in your area.
Model Yourself On The Experts
Find one or two role models within the industry that can serve as a continual example to your club. For example, you might choose someone like Fortress co-chairman Peter Briger. By analyzing their work and basing your own investment strategies on theirs, you can often enjoy pro-level success even as a beginner.
Have Backup Plans
No investment group is successful 100 percent of the time, so it’s important to have working strategies for when things go wrong. How will you divide a meager payout among the members? What about dissolution? Will members be held personally accountable for bad leads, or will you have a blanket forgiveness policy?
Monitor Your Progress
Remember those goals you set? Check them periodically against the progress you’ve made as a group. If your numbers aren’t where they need to be, it’s time to change something within the team. Review your gains and losses; analyze the market for unexpected developments; check your cash balances against recent investments and personal incomes. Keep your goals in sight if you want to succeed in the long term.
These are just a few tips and tricks for starting your own investment group. It’s a risky market, but the returns can be substantial to those who are willing to put in the work.
© 2014, Khaleef “Fat Guy” Crumbley. All rights reserved.