Investment clubs

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10. Attracting members to your club

There are two schools of thought on how a club should go about recruiting new members.

1. Keep it personal
   The first school argues that it is best to bring in people who already know each other and who have some shared experiences. Theoretically, this minimises the risk of a personality clash.
2. Cast a wide net
   The opposing argument is that it is dangerous to mix friends with money, because if things go wrong you not only lose a member of your club, you also lose a friend. Better to find members outside your immediate social circle, and to build some diversity into the gene pool.

There is no right or wrong about this. It is really a question for each club.

As far as the number of members is concerned, there is no minimum, but clubs cannot have more than 20 members. Three or four people is sufficient, but most clubs work better with eight or nine, since that will build the investment fund up more quickly, particularly in the opening stages.

Attracting outside members can be done a number of ways. You can advertise in local newspapers, or in ProShare's investment clubs newsletter, or you can post a message on one of the online newsgroups.

From a legal point of view, advertising for members does not mean that the club is offering an investment service - an important point, as you wouldn't want the regulators mistaking you for an unauthorised unit trust!

Subject to discrimination laws, it is up to existing members on who they allow to join the club and who they reject. To avoid insult, it is wise to put the formal criteria for membership in writing, so that there is an objective record of membership eligibility. The issues such a document would cover are:

• How much a member must be willing to invest per month
• Where a member lives
• What past experience a member has
• How long a member expects to invest for

The vital thing is that there is a 'meeting of minds' among members. Clubs which start out with a fault line in their membership will quickly experience tremors and even quakes. Take care to build a membership that can approach its investment as a cohesive force, not a fractured one.

It is important that the founder members of a club all attend the inaugural meeting so try to find people in a similar location.

1. What is an investment club? 2. A simple explanation of how it works 3. Why join an investment club? 4. Deciding on your aims 5. Joining an existing club 6. Preparing to launch a new investment club 7. The draft constitution and rules 8. Drafting the investment strategy 9. Example of an investment strategy 10. Attracting members to your club 11. Preparing for the inaugural meeting 12. The inaugural meeting - appointment of officers 13. The inaugural meeting - key decisions 14. Things to do after the inaugural meeting 15. Starting the processes 16. Running the first meeting 17. Regular meetings - the key to success 18. The cash account 19. The capital account 20. The asset register 21. The annual general meeting 22. Tax 23. Performance measurement 24. Dealing with a member leaving 25. Conclusion

• ProShare Investment Clubs Looseleaf Manual
• The Motley Fool Guide to Investment Clubs
• The Company of Successful Investors