How to Start an Investment Club

Does the thought of investing in the stock market give you the shakes? You're not alone -- many Americans know that it's smart to invest for the future, but are too intimidated to take the plunge.

If that sounds familiar, "Good Morning America's" Investment Club could help.

Mellody Hobson looks at the growing trend of clubs dedicated to learning about and investing in the market.

No Men Allowed

It's no secret that the world of finance has long been dominated by men. But a growing number of women are making waves, forming all-female financial clubs.

In Sacramento, Calif., a group of women formed the Millennium Money Makers Investment Club.

The women are a group of moms who met when their children got involved in theater together; the women founded the group in 2000 as a means of learning more about the world of finance.

The club's No. 1 rule -- no men. They feared that by including men, they wouldn't really learn to think for themselves.

"The main goal of the club is about education," said Anne Becker. "It's also about having a good time, but education is our main goal."

Over dinner and drinks, the group of 22 mull over stocks, share insights and pool together their combined financial wisdom.

The women say the only way to learn about the world of finance is by jumping in -- and sometimes failing.

"I've recently learned that in order to learn how to invest, you have to be willing to use your own money -- to invest your own money and put it where your mouth is," said Nancy Bergold.

"We all are into the ups and downs of the stock market and it doesn't bother us when it's up or it's down. We like to laugh when it's up and also like to laugh when it's down," said Carol Crosta.

After a tough first couple of years, the Millennium Club women say they are on the upswing. They saw a 37.8 percent jump in their portfolio in 2004 and 8.6 percent increase in 2005.

Mellody's Tips

Mellody Hobson has some advice for others thinking of starting an investment club.

Club Advantages

Reduced Risk: Consistently investing money over time, regardless of market conditions, reduces your risk.

Lower Fees: By joining forces with a small group of investors -- think between six and 20 people -- you'll pay lower fees and commissions than you would investing on your own, because your purchases with the group will be larger. And with more buying power, you'll have access to more investment choices.

Diversification: Keeping your portfolio varied is essential for all investors to spread out your risk. Diversification comes about naturally in an investment club because there are many voices coming up with many different ideas.

Establish Rules

It is critical to establish club rules -- such as how much each individual member will contribute, responsibilities for each member as it relates to investment research, how to handle taxes and administration, etc. -- everything from when and how often to how to decide on the stocks and funds for investment.

This is not like a book club where if you take a month off, the only thing lost is your enjoyment of the book. Each member needs to be fully committed to the goals of the club and not fudge their way through the process like you might with a book club discussion.

Choosing Investments

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