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Your Investment Club's Goals and Philosophy

Every club should have its own goals and philosophy. These should be determined early in. For most, the goals will be simple: Learn more about the stock market and investing, and/or make money over the long term. If your club members plan to make money over the short term, an investment club may not be the right choice. Goals can help determine what your club should do with its time and money, and one of those goals being education means that everyone benefits from the club, even in the short term. Members may use the knowledge that they have gained from their investment club to start investing on their own as well as with the club. Also, clubs which have education of their members as one of their goals tend to have profits follow more easily.

Your club should also have an investment philosophy. This philosophy does not need to be very formal, but it should reflect what type of company all the members want to invest in. This helps to narrow down what companies the club chooses to invest in, although, of course, you also want the companies you invest in to perform well. Your philosophy may reflect how much risk your club members are willing to take, or how old a company must be before your club will invest in it.

With so many companies to choose from, it may be tempting to close your eyes and point to a stock on the page, or throw a dart at a list of stocks. But if you are sure of your investment philosophy, then you will only choose companies that have a chance at performing well in the future, as well as only choosing companies that fit your philosophy. This narrows down the number of companies that your investment club may want to research.

To choose a philosophy, you may wish to read a book about investment philosophy. Motley Fool books are good resources, and there are websites as well that recommend certain philosophies.

Your philosophy may include other factors based on your members. Members of your investment club may want to only invest in environmentally conscious companies, or may only wish to invest in North American companies. Members may prefer to stick with smaller companies with a limited number of stockholders, or they may prefer larger companies. Members might even want to restrict their investments to only company’s whose products they use, or only company’s that have the owner’s names in their company name.

Whatever your investment club’s philosophy may be, be certain that every member agrees to this philosophy. You might even hold a vote. Once your club has chosen a philosophy, stick to it. This philosophy is your club’s best defense against impulse buys and sells.