5 Ways to Make Your Investment Club Prosper - Black Enterprise

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Black Enterprise Magazine July/August 2018 Issue

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It’s always easiest at the beginning. Whenever your investment clubs meets, everyone is bustling with enthusiasm. There’s never a problem getting members to research stocks. There’s a feeling, a spirit that anything is possible.
Two years later, though, it’s a different story. The excitement has started to fade and club members start to slack off. They stop coming to the meetings. They do less and less work researching companies and recommending stock picks. Their idea of belonging to an investment club has narrowed to sending in a check for their dues each month.

It takes more than a monthly contribution to achieve wealth, though. BLACK ENTERPRISE decided to talk to clubs that have gotten over the two-year hump on the road to long-term success. We looked for their advice on how to keep that initial momentum going strong. Here are their tips on how to help your club survive the down cycles of group investing. After all, you need members who are willing to do the research and devote their time to club activities. You need the group to pull together. And, if your club hangs in there long enough, everyone will reap financial rewards.

Perhaps the greatest challenge clubs face is keeping members active. “What happens is that a handful of club members end up doing 80% of the work, which eventually leads to resentment and fleeting club members,” says Walter L. Clark, vice president of investments with Gruntal & Co. L.L.C. in Baltimore, and financial advisor to several investment clubs.

It doesn’t help that member participation tends to drag in a declining market. Then again, doubt sets in with club members who thought they would make money quickly, and then jump ship soon after the club’s formation, adds Clark. “The first two years are really the building blocks. The club can’t afford to have such setbacks because people become complacent and impatient.”

Thomas O’Hara, chair of the National Association of Investors Corp. (NAIC) in Royal Oak, Michigan, agrees that it is crucial that clubs stay together for a significant period of time; otherwise, their potential to achieve long-term gains will vanish. “If club members can be persuaded to continue even during long down periods, you are virtually certain to purchase stocks at bargain prices and profit handsomely when prices move upward.”

A buddy system can be one way to keep members active and interested. Your club can form teams of two or three members who meet outside of the monthly meetings to do the research together, and then present their findings to the group.

The Black Women Investment Corp. in Raleigh, North Carolina, used another strategy to keep members motivated: training programs. Every partner is required to complete a short session each month and attend an annual program that could last one day or six weeks. The sessions cover a wide range of issues, such as using library resources to investigate companies, finding information on-line and using NAIC tools to analyze and select stocks. “Last Year, we had six three-hour sessions

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