Stock Trading - It's Never too Late to Start!

Stock trading clubs are simply groups of people that share an interest in the stock market who pool their money to create a fund to buy and sell stocks. They can be your friends, co-workers or family. Members contribute into the pool on a regular basis (weekly – monthly etc..). It is usually preferred that members contribute in cash.

Generally stock trading clubs have between 10 and 40 members, most have around 15. Decisions are made democratically, one person=one vote; or with weighted votes, where each person’s voting strength is determined by the amount they have invested. Clubs can be partnerships, or corporations, partnerships are more common. Day trading clubs are not required to register with the Securities and Exchange Commission.

Before joining a stock trading club thoroughly check your finances. How much can you afford to lose? How much debt do you have? Will you need this money you plan to trade with? Don’t trade your rent money !!!

What to look for in Stock Trading Clubs:

• The club needs to have clear investing and trading goals.
• The club needs to clearly specify the strategies it plans to use to obtain those goals. Will decisions be based on technical or fundamental analysis or a combo of both?
• Minimum amount of money to join?
• Trading/Investment period-Is there a minimum length of time your money will be tied up in a trade?
• Any hidden fees or penalties for early withdrawals?

Fine Print- before signing read everything over thoroughly and understand your commitment.

• Profit reinvestment/distribution- what percentage of the profits are going to be distributed to members and when will these distributions be made.
• Online clubs- now a days there are clubs online. Be sure to thoroughly research them as there are countless rip offs out there.

Benefits of Stock Trading Clubs:

1. Large amount of combined trading and investing knowledge.
2. Reduced risk.
3. Diversify your investments, and not be limited to just one or two market choices. With a larger amount of pooled money comes the ability to trade in many stocks or markets at once.
4. Confidence builder. It is a safe place for beginners to get support from like-minded people.
5. Low initial investment. If you only have a small amount of money to invest each month, $25 to $50, then a club might be ideal.
6. Fun and educational. Stock trading clubs combine all the social aspects of a club, so you learn about investing without that classroom atmosphere.
7. Potential for greater returns than with a cd or bank account.
8. Your money is much more liquid, allowing you to take advantage of more opportunities.

Drawbacks of Stock Trading Clubs:

1. Democracy Rules- your money may go into investments that you voted against.
2. Some stock clubs charge a rate to join and a retainer fee.
3. Time Consuming- doing research, analysis, and discussions.
4. Stock trading clubs don’t remove risk. They only reduce it.
5. Difficult to join – most good clubs were established by a group of friends often many years ago and don’t want new people
6. Scams- Before joining an online investment club, check out its reviews by other members. Find out its investment performance and how long they have been operating.

Stock Trading Clubs are a great way to make money. Recent studies have shown that when a group of people make investment decisions after a series of discussions and debates, the potential for profit is greater than when individuals make their own decisions. Usually there is at least one professional (extremely successful) trader in every club. Who, whether to show off or just be generous will share their ideas. In addition to making money, you will have made new friends and strengthened the bonds with old ones. Remember if you can’t find the right stock investing club, you can always start your own.

Learning what to buy, when to buy and when to sell is pretty overwhelming. Stock trading clubs may be the answer.