An investment club is an association of individuals who each put some of their spare money into a separate entity (the club), and who invest the club's funds in the stock market for the benefit of all members. Legally, the club is a partnership and governed by the Companies Act 1985 and the Partnership Act 1890.
Members put money into the club on a regular basis - usually every month - although they don't all have to put in the same amount. Through these regular infusions of new cash, reinvested dividends, and hopefully through trading profits, the total funds of the club should grow over time.
The dividends received by the club and the shares which it owns accrue to the benefit of members. Each member's interest is proportionate to the number of units he or she owns in the club as a percentage of the total number of units.
Most clubs have between 9 and 14 members, and are not allowed by law to have more than 20. During the life of a club, members can leave and withdraw their cash, and new members can join. There are procedures for dealing with both events.
Apart from delivering real investment gains to its members, one of the prime aims of an investment club is social. Members participate not just because they want to make money, but also because they enjoy it.
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