In the past three years, the number of investment clubs in the U.S. has more than doubled, according to the National Association of Investors Corporation (NAIC). This is the not-for-profit organization that supports the formation and operation of investme nt clubs.
An investment club is nothing more than a small group of individuals, usually comprised of friends, coworkers, church members, neighbors and family members, who meet on a regular basis for the purpose of pooling their funds and investing in a club portfol io.
NAIC reports that the number of investment clubs who are NAIC members has reached an all-time high (including 64 clubs that have been in existence for more than 40 years). What's more, 42.9 percent of these clubs outperform the S&P 500, a feat the majorit y of professional mutual fund managers can't beat.
While these clubs are certainly interested in making a profit, members also find that investment clubs are a great way to learn about investing. In fact, NAIC recommends that clubs focus on education first and foremost. If club members are too concerned a bout having their portfolio show lots of big numbers in the profit columns, especially when they're first starting out, their stock selection is likely to suffer. Clubs that follow this advice and maximize the educational aspects of their meetings usually find that profits follow.
With an educational component in the forefront, investment clubs can be a great vehicle for beginning investors. Clubs offer the structure and support that many people need to get started investing, and clubs make it possible to get into the market withou t a big initial investment, another incentive for new investors.