Have you heard of investment clubs? An investment club is a group of people, acting as partners, who pool their money for investments. It is normally a group of fewer than 100 people. They meet regularly and make decisions about investments through voting. There are many advantages and disadvantages of forming an investment club. Some of them are listed below.

Benefits of Joining an Investment Club

• In an investment club, you get to learn different things. People get together and share different opinions and ideas. That helps to gain knowledge and information. You actually study different investment options, different financial quotations and after that, you come up with a final decision. In doing so you get to learn about different stocks, their prices, investment schemes so in short, it improves your knowledge.
  
• Another advantage of an investment club is that you can spread the cost. At times, when you plan to invest in something, you don't have enough money. Investment clubs actually give you the opportunity to spread your cost. You are not the sole entity who is paying for the cost of the investment. It is divided equally among all members or in some cases ratios are defined and members pay according to those ratios.
  
• An investment club is a platform where you get to meet different people. Here you are not just working and evaluating different investment options, you are also interacting with other people. You share food and drinks with the members of the group and in the process, you make some new friends. So in the profit making business you also get benefited personally.
  
• In some investment clubs, guest speakers are called to give speeches about investments. They talk with experience and knowledge. That way you learn different practical realities of the business world. One of the easiest ways to learn is through experience. And it doesn't matter that the experience was yours or someone else's.
  
• Each club offers different amounts and levels of investment. You can choose from multiple options. If you have more money than you can invest with bigger groups but if you don't have enough money then your requirements would lead you to start with smaller parts too. In this way, you never get burdened with the responsibility of paying too much. You just have to carefully evaluate your options and after that, you can invest in the one which is most appropriate for you.
  
• An investment club brings an investment discipline to you. Normally when a person is operating alone, he gets scared easily when the price of the stock goes down. So he immediately sells it and buys another one. But that is not always the wise move. At times, the prices of stocks fluctuate for a while but they go back up very quickly. So when you are investing as a group you don't get scared easily and make rash decisions. This helps you in the long run and you end up with a lot more than you expected.

Downsides of Joining an Investment Club

There are different advantages of joining an investment club but on the other side, it has some disadvantages as well. Some of them are illustrated below:

• No matter what type of business you are in, you always need trustworthy partners and members. Trust is one of the most important factors in any business dealing. When you don't have trustworthy members in investment club you will always fear that they might run away with your money. You are never comfortable in sharing any sensitive information with these people. And you will always feel like your money is in jeopardy.
  
• It is very common that disagreements happen when you are working in a group. It is not possible that all the members of a group have the same opinion about something. Some of them will agree with some things while others will not agree. So in that case, a group gets torn in two parts. But at the end, they have to choose one way which is preferred by most members. So if you are going in a direction which other members disagree with then you might end up putting your money on a plate which you didn't like in the first place.
  
• One of the most difficult tasks is to break up from the investment club. Normally, when members make investments together they share the profits as well as taxes that comes with it. So when one member wants to leave the group it gets difficult to decide that how much tax he will pay and how much tax will others pay when he leaves. Since it’s a financial matter so it also gets ugly at times. And people end up fighting with each other over this matter.
  
• At times, the clubs are limited in scope. You may differ from them and you are willing to take a risk. But when your group does not agree with you, you can’t proceed. So then you have to play it safe and move along the way that your investment club chooses.
  
• At times, you end up with a group who don't have much information about stocks and investment business. In that case, you have to be very careful because your group members could distort your position in the market and your money as well. After you realize the reality you should try to get out of it as soon as possible. If not then you need to invest your money very carefully.
  
• When you work in a group there is always some kind of emerging leader and normally people listen to that person. However, it's not always true that whatever that leader suggests is actually beneficial. But sometimes people just blindly follow this leader and do as he says. The best way to deal with it is to do your own homework. Study all the stocks and finances and come up with your own action plan. After that share it with the group and that emerging leader. Maybe they find your idea better than anyone else.