New! Eligible SoFi members can invest in upcoming IPOs before they’re traded on the public market—only in the SoFi app.* Learn more

4 Steps To Start an Investment Club

January 05, 2021 · 4 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

4 Steps To Start an Investment Club

Maybe you and your coworkers spend breaks discussing the market or you’re always texting friends about financial moves. Maybe all of you are huge Warren Buffett fans who want to model your own decisions after his investment strategies—or maybe you want to raise capital to buy a specific stock. Whatever the reason, you may be thinking about starting an investment club.

What is an Investment Club?

An investment club is a novel way for people to come together and help one another reach their shared financial investment goals by discussing those goals and working together to make them come to fruition. Talking through what-ifs, gathering advice, and learning from other people can be one way to broaden an investor’s knowledge base and alert them to popular investment trends, like investing in cryptocurrency or impact investing.

Typically, an investment club can take on one of two forms, depending on the interest and goals of club members. Some investment clubs pool their money so that the group invests as one unit. Other investment clubs, sometimes called self-directed investment clubs, meet to discuss strategy or invite speakers to share on various topics, but each investment club member invests independently.

For investors who decide to pool resources and invest as a group, it’s important to understand any regulations and guidelines. Depending on the structure of the investment club, it may be necessary to register with the SEC as an investment company, and it may be smart to set up the investment club as a legal partnership.

Step 1: Decide On The “Why”

The first step in starting an investment club is figuring out the purpose of the club. Understanding and agreeing on the motivation behind the investment club can help like-minded members craft a mission statement and bylaws.

There are many reasons for starting an investment club. Some people want to pool their resources and enjoy the camaraderie that comes with a mutual goal. Others want to explore specific areas, such as impact investing or invest in alternative investments, such as startups or mineral rights. There are any number of reasons to start a stock investment club.

A frank discussion can help narrow focus and weed out members who might be happier in a club with different goals. These discussions can also be a good time to discuss the financial commitment of the investing club. Some clubs may have annual membership fees used for club expenses such as speakers, meeting space, and supplies, as well as a monthly expected contribution to earmark for investing.

Step 2: Observe Existing Groups in Action

Once you’ve decided on the “why” of your club, it can be helpful to see a few investment clubs in action. An online search may help you find clubs in your area. There also may be “model clubs” that are open for observation. (Better Investing , a national nonprofit, has listings for investment clubs around the country.)

Pay attention to how these club meetings are run, including the format and structure (guest lecturers? Casual, open conversation?). This will give you and members of your club a sense of how you’d like your meetings to go.

Step 3: Kick Things Off with Informative Sessions

Before getting deep into group investing, it may be helpful to have several investment club meetings without pooling funds. These club meetings can include a speakers series or an open forum opportunity to discuss approaches to the market, and can be a good way to assess whether or not taking the next step and forming an investment club makes sense.

Step 4: Create a Legal Framework

Many investing clubs operate as a business entity, either as a Limited Liability Company (LLC) or Limited Liability Partnership (LLP). It can be helpful to create a legal framework for your investment club that clarifies and addresses specific financial questions, including:

•  Will returns be reinvested or distributed to members?
•  What happens if someone decides to leave the club?
•  How will investment decisions be made?

The answer to this last question may also change whether or not your investment club needs to register with the SEC. For example, if you have one club member making investing decisions, or one club member providing investment advice to the rest of the club, that person may need to register as a financial advisor with the SEC. There may also be state-specific securities requirements that a club may need to comply with.

You may also want to make sure you have a clear understanding of tax implications of investments. Creating membership bylaws, even if your club is an informal group of friends and acquaintances, can help make sure everyone is on the same page and there are no misunderstandings about financial club commitments and club purpose.

The Takeaway

Starting an investment club has the potential to be rewarding in many ways: It can be beneficial to develop and discover investing strategies with peers, and in some cases pooling resources to invest together can bring members closer to their individual financial goals.

For investors who don’t have the bandwidth to start up a self-directed investment club, there are other options. Talking stock tips at the water cooler is one classic strategy, but another option is to join platforms that allow you to “watch” the investment moves your peers make in real time.

For example, SoFi’s investing platform allows you to follow people’s investment moves. This opt-in app feature hides actual dollar amounts, but allows you to view watchlists of other participants, view people’s SoFi Invest activity, and see your own investments play out on a dynamic leaderboard. This can be a way to actively participate in the market together, while keeping your finances separate.

Find out how SoFi Invest® can help you build on your financial goals.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

SOIN20263

All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store
SoFi Android App, Get it on Google Play

TLS 1.2 Encrypted
Equal Housing Lender