Executive summary

Investment clubs peaked popularity in the 80’s and 90’s and that makes sense, there was no internet back then, now everyone can jump into an app and start investing in the stock market. Back then you had to find a trustworthy broker and or club, to get investing experience. With a club or a group, you can learn and start investing with low risks. The main goal for an investment club is to educate the community/culture/members about financially literacy and investments.

An investment club is a group of individuals who meet for the purpose of furthering their financial education, pooling money and investing. Members meet on a periodic basis to make investment decisions as a group through a voting process and recording of minutes or gather information and perform investment transactions outside the group. Exclusivity and transparent procedures are important for success.

Byjoiningan investment club, you are fighting against financial illiteracy and lack of resources. Financial education is useful at any age, and all legal adults should have a basic understanding of the financial system of the United States and the world. The culture/community/members are being educated on the subject such as: credit score, stock market, taxes and much more. The emotional intelligence that comes with financial education because it’s an understanding that it takes discipline to save money, raise credit scores, and create profitable investments.

According to the 2019 Financial Literacy Survey conducted within the United States by The Harris Poll and National Foundation for Credit Counseling found that lack of funding for the down payment and/or closing costs is a common barrier (McClary, 2019). The survey also revealed that black/African American and Hispanic homebuyers are more likely to encounter obstacles in the homebuying process than those identifying as white (McClary, 2019).

A poor credit history is also among the top roadblocks for U.S. adults who have attempted to purchase a home, an issue also faced by a portion of homebuyers with a limited credit history (McClary, 2019).  Hispanics and African Americans fare worse than white homebuyers when it comes to reported barriers relating to thin credit files (McClary, 2019).  

Debt issues are shared by homeowners and renters alike but can sometimes get in the way of those struggling to move from renting to owning (McClary, 2019). Below  is an illustration of a breakdown of financial topics an indivudal will learn and put into practice when joining aninvestment club that focuses on the education for the culture/community on matters that are going to affect rest of our lives.

Figure 1. Personal Finance – Wealth 101(Wealth 2020)

The educational aspect for the investment club is to disseminate information about personal finance and investing to our community is a priority. The mission is to teach the community the rules on how money works. Money / investing has to do with emotional intelligence. Investors need to how to save money, how to cut expenses, how to budget, and later how to hold an investment when the market is in volatile times.

The sustainable investment club that is being joined or created: would build their investment portfolio by following the value investing philosophy is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value. Value investors actively search out stocks they think the stock market is underestimating. It’s based on the Warren Buffet strategy he is one the most successful stock investor in 20^th century.

With a sustainable twist on education and investment favors companies that have environmentally friendly practices. A small specific group of people that have agreed on sustainable – value investing philosophy is part of the sustainable investment club.

An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time. When an individual purchase a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth. An investment always concerns the outlay of some asset today—time, money, or effort—in hopes of a greater payoff in the future than what was originally put in (Chen James, 2020).

In conclusion, when joiningan investment club do your due diligence. Please visit the National Association of Investors Corp. (NAIC) which is dedicated to providing investment information, education, and support that helps create successful long-term investors. Known by its public-facing brand BetterInvesting, the NAIC is a non-profit organization made up primarily of investment clubs and their members. (BetterInvesting, 2020)

Previous Approaches

Previous approaches feature the Klondike Investment Club of Buffalo, Wyoming, that was voted 1996’s top investing club by the National Association of Investors Corporation (NAIC). What are the lessons learned from the successful investing club? Cook (1996)

“While the Buffalo club operates today like a smooth-running machine, it got off to a rocky start. A community investment group of the same name whose members had the good sense–and dumb luck–to liquidate their holdings just before the 1987 crash, the reborn Klondikers made their first investment in October 1987, laying out $3,895 to buy 100 shares of $105 billion retailer Wal-Mart. Then came the Crash, which sent Wal-Mart tumbling 27% to $28 a share, leading some members to doubt the wisdom of the whole undertaking. Fortunately, the club hung in there, and its Wal-Mart stock split twice before the club sold it for a 302% gain 8 1/2 years later. But several original members who lacked the patience required for such buy-and-hold investing dropped out during the late ’80s and early ’90s” (Tony Cook, 1996).

The Buffalo guys and gals have built their success on an impressive array of winning stocks. The biggest long-term gainer in their portfolio is $1.5 billion (estimated 1996 sales) Harley-Davidson. The motorcycle manufacturer has roared to a 563% gain in the 5 1/2 years the club has owned it. Abbott Laboratories, the $10 billion drug giant, has earned 441% for the club over the past nine years. And $4 billion computer network supplier Cisco Systems is up 397% in 2 1/2 years. Says Sanborn, “The best-performing clubs–like Klondike–favored blue-chip growth stocks and held them for a number of years.” Tony Cook (1996)

How to beat the averages by following some simple rules. Here, according to the conservative gunslingers of Buffalo, are 5 of them.

1. Invest regularly. Since the club requires members to ante up at least $50 a month (as noted above), the organization is able to put new money into the market several times a year. It doesn’t necessarily have to sell anything to buy a stock it likes (Cook,1996).

1. Don’t try to time the market. The club keeps all its money in stocks, all the time. It does not increase or reduce its stockholdings based on the outlook for the market or the economy. By staying fully invested, the Klondike Club never has to worry about missing a big rally(Cook, 1996).

1. Rely on research–not good “stories.” Sure, members’ own knowledge has led to some spectacular winners. But before adding any stock to the portfolio, the club does extensive research on the company’s fundamental financial condition and growth prospects (Cook, 1996).

1. Buy solid stocks and hang on to them. Cook (1996).

• Review your portfolio regularly. “Buy and hold” doesn’t mean “Buy and never sell.” But the hardest thing in growth-stock investing is knowing when to cash out Cook (1996).
• Balance the risk within your portfolio. The Klondikers have tried to invest in a variety of industry groups; that way, a slump in a particular sector, such as health care, wouldn’t ravage the entire portfolio. They own stocks from 13 different industries, including drugs, computer peripherals, semiconductors and telecommunications services. Recently, they have also tried to add smaller companies to the portfolio to reduce their reliance on giant corporations like $116 billion Ford and $21.7 billion Johnson & Johnson. Their recent investment in less gargantuan companies such as $635 million American Power Conversion and $760 million Century Telephone Enterprises have added to their spectacular gains, though not as much as some members would have liked Cook (1996).

Its members, ages 30 to 70, include a doctor, a prosecuting attorney, a bookkeeper, two teachers, a retired school superintendent, a veterinarian, an entrepreneur, a cattle rancher, an insurance agent and two service station operators (Dick Reimann’s son Steve is a club member too). “Some people can’t believe that some dumb gas jockeys could beat the guys on Wall Street at their own game,” says the younger Reimann.

In article  Six lessons you can learn from America’s top investing club Cook (1996) is to understand why a group of ordinary citizens in a tiny western town could become world-class market mavens, you have to understand the sort of community Buffalo is. Named for Buffalo, N.Y. by a pair of settlers newly arrived from the East, Buffalo was Butch and Sundance country, home to ranchers, rustlers and renegades. It has big skies, frigid winters, and a hardscrabble economy that breeds both self-reliance and a we’re-all-in-this-together kind of fellowship. “Your hands get tired waving at everybody in town when you’re driving,” says Klondike president Reimann, whose grandfather was a justice of the peace in Buffalo during the late-19th-century Johnson County cattle war between ranchers and homesteaders. “That friendliness and respect is reflected in everybody’s attitude when it comes to investing our money.”

And it was their steady, methodical approach to managing their money, as much as their returns, that helped them nab the title of America’s No. 1 investing club. This year, 580 clubs vied for the title by submitting their results to the National Association of Investors Corporation, a nonprofit education group that represents clubs and individual market enthusiasts. The NAIC chose 38 regional finalists, then turned over their names to Value Line, the Wall Street research firm. Analysts at Value Line examined the portfolios and named the Klondike Club No. 1, based on its overall results–and how it achieved them. (Cook, 1996)

The we in this together attitude for the long term, sticking to the original decision based on research, sticking through bad times is why the Klondike Buffalo investing club is successful. Following certain values in easy and difficult times, discipline.

The cohesivenessof the individuals getting together to create an investment club have to be seamless all parties should believe the founding principles. Investment clubs fail because of lack of cohesiveness and expectations. Below another example of a previous approach.

In 1993 Kiplinger’s chronicled magazine started the 1729 Club, the investment club of editorial assistants, reporters, writers and editors. Early in 1997, down to a core group of about five members, the club voted to disband. (Gallagher, Germer, 1997)

In the two years after the story appeared, the stock market grew like gangbusters, and the 1729 Club had an annual return of more than 20% in both 1995 and 1996. But the group still succumbed, for reasons that will leave members of other investment clubs nodding their heads in sympathy. (Gallagher, Germer, 1997)

First, the amount of work involved in starting the club and following operating guidelines set by the National Association of Investors Corp. was daunting. “Getting through the Stock Selection Guide took a lot of knowledge and patience,” says Mark Solheim (1997), the club’s first presiding partner. (Gallagher, Germer, 1997)

Six lessons learned from investing club by Stephanie Gallagher, Erika Germer (1997) building a portfolio is only one goal of investment clubs. Becoming educated about the stock market is another, and in that sense the 1729 Club lives on. Because of their experience, a number of members who once depended exclusively on mutual funds now feel comfortable enough to invest on their own in individual stocks.

When joining an investment club, you need to find the right club or the right individuals that share the same investing values. Create an application process that thoroughly assesses the financial commitment of members. Individual members with common goals can help foster a sense of trust and respect for one another.

New findings.

Applying the lessons learned from the 90s, we have new findings. Join or create an investment club with financial education where you could learn, and practice investing. With people that share a similar mindset about investing it is important for growth. Because if you surround yourself with people with no financial education how are you going to learn about predatory lending, high interest rates, variable, fixed rates, and taxes! It’s the financial lexicon that young women and men should be learning and putting in the practice.

Is not 90s when investment clubs where popular there was no internet and that’s a big game changer because we can access information about anything at any time in our smart phone’s, computers, and tablets etc. etc. The can be used to download any financial app and start choosing and picking stocks. That’s great now joininginvestment club is an online experience. Now the investment club purpose becomes more educational by providing access to best market analysts, business leaders, politicians, scientist and experts on particular industries.

Joininga modern investment club would include de production of educational content for YouTube, blogs, and social media outlets about financial education/investments. The content will include on interviews with successful investors, business individuals, organizational leaders and other investment clubs on best practices and fundamentals of investing. In addition to referencing books, governmental agencies, and universities on how anyone with any size budget can put to work finance fundamentals.

BetterInvesting (2020) non-for-profit organization focused on education. We do not manage your money, nor do we give advice on which stocks to purchase or sell.  We do teach you how to select high quality growth companies using our Stock Selection Guide, and we cover many investing topics. Our education will help you to invest successfully on your own, or as a partner in an investment club.  Every aspect of our membership is aimed at educating.

“We look for stocks with a price/earnings ratio that’s equal to or lower than the stock’s average P/E for the past five years, low price volatility and, in many cases, a Value Line timeliness rating of 2 or better,” says past president Lloyd Wise, 39, who teaches physical education at Clear Creek Middle School. Above is an example of a member can learn how to evaluate companies for themselves or for a club (Betterinvesting, 2020).

When joiningan investment club, you are going to participate in building a stock/securities portfolio. The club’s portfolio should be available to members and the public to view the selected stocks/securities and the data on why that stock or financial instrument was chosen and of course the returns.

Figure 2. Financial Education

Four investing principles:

1. Invest a set amount of money regularly.
2. Reinvest all dividends and earnings to leverage compounding.
3. Buy quality growth stocks at reasonable prices to avoid paying too high a price for the stock.
4. Diversify your holdings to minimize risk.

Value investing is to purchase quality companies at a good price and hold onto these stocks for the long-term. Many value investors believe they can do just that by combining several ratios to form a more comprehensive view of a company’s financials, its earnings, and its stock valuation.

The most difficult principle is to buy stocks of growing companies.  The online Stock Selection Guide (SSG®) is the foundation of the BetterInvesting stock selection approach. The SSG cuts through the clutter and organizes essential information on a company’s performance. This empowers individual investors to determine for themselves whether a company’s stock reflects a quality growth company, and whether the stock is selling at a reasonable price.  Simple enough to be helpful to the new or inexperienced investor yet contains enough detail for the experienced investor to expand their skills.  Our suite of powerful online tools makes it easy to find, analyze and compare quality growth stocks any time of day on your computer, smartphone or tablet (Betterinvesting, 2020).

Conclusion 

The purpose of this external white paper is for the audience to get educate on investment clubs and spark their curiosity to join one. A Sustainable Investment Club is an idea to build with a special group to educate the community/culture on financial matter.  Also, because so many people live in poverty or in debt or just simply don’t know rules of money and investments. The club would provide the unbiases information and tools to buy investments/stock on your own or as group. The new approach is more about the education for the culture, the community to understand how money works.

Lessons from previous approaches from successful investment clubs that with right people and due diligence you can create wealth with a group of Family, Friends, Business Professionals, Associates, and or Entrepreneurs. The Securities Exchange Commission SEC (2020) states that investment clubs are generally formed as general partnerships, but could also be formed as limited liability companies, limited liability partnerships, corporations, or sole proprietorship that transfer real estate assets to a group living trust.

References

Betterinvesting (n.d.) Put a legal structure in place. Betterinvesting.org https://www.betterinvesting.org/explore-stock-investment-clubs/how-to-start-a-stock-investment-club/forming-your-investment-club/put-a-legal-structure-in-place

Chen, James (2020 September 02) What is an Investment?  Investopedia.com. https://www.investopedia.com/terms/i/investment.asp

Cook, Tony (1996) Six Money Making Lessons you can learn from America’s top investing club. Money,Vol. 25 (Issue 12) p88. http://ezproxy.umgc.edu/login?url=https://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=9611198153&site=eds-live&scope=site

Financial Education [Digital Illustration] Retrieved November. 20 2020 from https://www.canva.com/education

Keshner, Andrew (2019, June 27)) Americans Financial Literacy Skills. Market Watch.  https://www.marketwatch.com/story/americans-financial-literacy-skills-have-plummeted-since-the-great-recession-2019-06-26

Organization and Growth [Digital Illustration] Retrieved from https://www.canva.com/investment

McClary, Bruce (2019 April 08) One in two American who tried to purchase a home have faced barriers. PRWEB. https://www.prweb.com/releases/one_in_two_americans_who_have_tried_to_purchase_a_home_have_faced_barriers/prweb16226083.htm

U.S. Securities Exchange Commission SEC (2018). Investment Clubs and the SEC. Retrieved from  https://www.sec.gov/reportspubs/investor-publications/investorpubsinvclubhtm.html#:~:text=An%20investment%20club%20is%20generally,based%20on%20a%20member%20vote.

Desjardins Jeff (2018) The Personal Finance Landscape [ Digital Infographic] Retrieved from https://wealth.visualcapitalist.com/personal-finance-landscape/

Research and Development

There is a lot to learn about the financial industry, and financial laws are always changing. That means you can’t stop learning and mean while you are studying you might discover a company that is being undervalue by the market.

The purpose is to recruit members to build a sustainable investment club and to educate the culture on financial literacy.

Research on previous approaches to successful and unsuccessful investment clubs.

The problem is financial literacy and lack of resources. Education on financial vocabulary is useful at any age. Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources.

Emma is a high school teacher who tries to teach her students about financial literacy. Through her curriculum, she attempts to educate them on the basics of a variety of financial topics, such as personal budgeting, debt management, education and retirement saving, insurance, investing, and even tax planning.

A legal adult of 18 years of age and older should invest in understanding the financial system of the United States and the world. The culture should understand the basics of knowledge of different business subjects such as credit score, SBA, the stock market, and taxes.

The second issue lack of resources as an individual, there are minimum resources and buying power but if we come together we have more resources and we increase our buying power.   

The new approach is introducing the word sustainable and how it will influence the decisions of the club.

Audience: Family, Friends, Business Professionals, Associates, Entrepreneurs 

The Latino Investment Club is bringing like minded individuals together in collaborate to create:

• profits
• cash flow
• assets

Please read Investopedia article below to understand the purpose of the Latino Investment club.

The quarterly meetings will follow Robert Rules of Orders. Members have the options to of a one time investment or recurring investments. The meeting will be set up video conferencing and when possible in person. A reminder for quarterly meetings will go out 2 weeks before and 1 week before.

• Roll call
• Old business – list of any unfinished business from the previous meeting.
• Summary of votes – Summary of all voted decisions from the previous meeting
• NAV presentation – NAV or the Net Asset Value of the Club will indicate what each club member is worth on paper.
• Available funds – a presentation of Available funds to invest.
• Presentation of current research – each member assigned to present an investment option will present his/her research.
• Vote to hold or invest – A vote to hold cash, sell current assets or invest in one of the investment options
• Investment vote – A final vote on an investment strategy specifying an exact amount to invest and strategy to execute that investment.
• Other business – Typically, other business will include proxy voting needs or other day-to-day business operational needs. This could also include options to change a brokerage house, or discussions of counter party risk.
• Formal close of meeting

Members:

Please subscribe so you can meet the members.

If you pay a members fee you get a vote on the budget.

Bringing like minded individuals to create profits, cash flow and assets for the culture.

Club’s Portfolio

Its a way to bring our resources together for the benefit of the culture.

• WordPress

By ADAM HAYES Updated Dec 2, 2019 Investopedia

What Is an Investment Club?

An investment club comprises a group of people who pool their money to make investments. Usually, investment clubs are organized as partnerships and after the members study different investments, the group decides to buy or sell based on a majority vote of the members. Club meetings may be educational and each member may actively participate in investment decisions.

KEY TAKEAWAYS

• An investment club refers to a group of individuals who each contribute money to a pool that is then invested for the shared benefit of the group members.
• You can think of an investment club as a small-scale mutual fund where decisions are made by a committee of non-professional club members. 
• Clubs can be informal or established as a legal entity such as a partnership. Either way, the club may be subject to regulatory oversight and must account for taxes properly.

How Investment Clubs Work

The advantages to investment clubs are that they are the easiest and most economical entities to form, operate and maintain, while the club’s income and losses are passed through to its partners and are reported on their individual tax returns. Investment clubs are also a terrific way to learn, make valuable contacts, and meet people interested in the same topics. Some clubs have made fortunes for their members. Investment clubs may be created by amateurs or professionals, and may invest or specialize in a variety of assets, or provide funding as incubators.

The SEC defines investment clubs as “generally a group of people who pool their money to invest together. Club members generally study different investments and then make investment decisions together — for example, the group might buy or sell based on a member vote. Club meetings may be educational, and each member may actively help make investment decisions.” For more, visit the SEC’s Investment Club Investor Publication.

The IRS describes investment clubs thusly: “An investment club is formed when a group of friends, neighbors, business associates, or others pool their money to invest in stock or other securities. The club may or may not have a written agreement, a charter, or bylaws.” It goes on to say that investment clubs tend to operate informally, with dues paid regularly (such as monthly). Some clubs employ committees that recommend investments while others involve each member in the process. Clubs subject any actions to a vote by membership. For more, see IRS Publication 550 chapter on Investment Clubs.

How to Start a Club

When setting up an investment club the following steps are recommended:

• Organize membership: Be sure to find candidates that want to actively participate. Consider utilizing an entry fee and a monthly membership fee to weed out the unengaged. Members should be trustworthy, open to performing research and able to afford such activity.
• Choose an organizational structure: Who will lead the club and how will they be selected and succeeded? How often will it meet? What are its rules? How will records be kept?
• Choose a legal structure: The most common structure is a partnership. This is important because a brokerage account cannot be opened without a legal structure. The club will need to get an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).
• Decide on goals and objectives, and create an operational plan on how to achieve them. This should be a group effort to build a consensus.

Taxation and Regulation

In general, investment clubs are unregulated. In United States, the U.S. Securities and Exchange Commission (SEC) requires any entity with more that $25 million to register under the Investment Advisers Act of 1940. Individual states may require registration but generally they do not have to if they have a small number of clients or participants. For more, see Investment Clubs and the SEC.

In the United Kingdom, investment clubs are considered unincorporated associations and are not regulated or taxed as corporations. In each case individual members are responsible for reporting gains and losses on their individual tax returns. In the U.S., income earned by investment club members is treated as partnership pass-through income. As such, members are required to file a Form 1065 and a Schedule K-1 each year. In the U.K., investment club members are required to file Form 185 Capital Gains Tax: investment club certificate.

References

Chen, James (2020) investopedia.com Define: Investment Retrieved from: https://www.investopedia.com/terms/i/investment.asp

Cook, Tony (1996) Six Money Making Lessons you can learn from America’s top investing club. Money Dec1996, Vol. 25 Issue 12, p88. 5p.

Financial Education [Digital Illustration] Retrieved November. 20 2020 from https://www.canva.com/education

Gallagher, Stephanie and Germer, Erika (1997) The downside of investment clubs. Kiplinger’s Personal Finance Magazine. Sep97, Vol. 51 Issue 9, p81.

McClary, Bruce (2019) PRWEB One in two American who tried to purchase a home have faced barriers. Retrieved from https://www.prweb.com/releases/one_in_two_americans_who_have_tried_to_purchase_a_home_have_faced_barriers/prweb16226083.htm

Organization and Growth [Digital Illustration] Retrieved from https://www.canva.com/investment

The Personal Finance Landscape [ Digital Infographic] Retrieved from https://wealth.visualcapitalist.com/personal-finance-landscape/

Betterinvesting. (2020). Betterinvesting.org how to start a club. Retrieved December 5, 2020 from https://www.betterinvesting.org/explore-stock-investment-clubs/how-to-start-a-stock-investment-club/forming-your-investment-club/put-a-legal-structure-in-place

Warren Buffet (2020) Fear and Greed Quote. Investopedia.com retrieved Dec.1 2020 from https://www.investopedia.com/articles/investing/012116/warren-buffett-be-fearful-when-others-are-greedy.asp#:~:text=Warren%20Buffett%20once%20said%20that,over%2C%20and%20one%20should%20be