Depending on how you want to structure it, it takes a lot of paperwork.

You need agreements, by-laws, and code of ethics at the least.

You might also want to register the club as a partnership for tax purposes.

you probably need a business bank account as well.

I opened a discount broker account with questrade in canada.

We have a initial fee of $150 and than monthly $40 fee. all the money goes to either bank or broker account and broker account and we make investment decisions.

it takes some time to get it organized, some members drop out and others want to join and not everyone will be doing the required work.
Its fun and time consuming, so far we have losses 2008 was probably not best time to start but lets hope things will change soon.

It’s probably not been much fun, given the market, and even less so these days… but at least there’s still friendship right?

i.e. value investors should stick together, growth-at-a-reasonable price investors should stick together, modern portfolio theory asset allocators stick together.

apply the same methodology to risk tolerance: high, medium, low.

So many things can affect what a collective group invests in and it can get tricky with tons of people, so you want to make sure you’re all on the same page. (25 yr olds should probably not be in a club with 80 yr olds due to equity vs fixed income debate, investment timeframe, and stuff like that)

However, like some have said, only a handful end up taking the roll of investors while others just seed money.

Personally, I have started similar thing withing a sub-company that I created. I sold shares to friends at a set price and that would be their seed money. Since they want me to do all the leg work and investing, I take a commission and report quarterly how their money is doing. Profits are paid out twice a year and its worked fine so far. Its a lot of work but atleast I know I’m being compensated for my actions.

For other investors, finding stocks and strategies are not hard to do if you are willing to put a little effort into it. Rather than joining a club and leaving the burden of having your money in a place you might not want it to be, follow some general sites/blogs, and invest your money and watch it grow. Its not hard!

The paperwork really wasn’t bad at first, but we’re switching from Zecco to Trade king in response to the fee changes, and that’s taking us longer than we would like.

The pooled research is great when it happens, but a lot of the time half or more of the group doesn’t do their share. We’re pretty relaxed though, and even the folks not doing the research I think are learning a lot, so it’s all good. It helps too that although we’re losing money we’re beating the crap out of the S & P, which we chose as our benchmark.

I ran an investment club once with pooled assets. The amount of paperwork, tax filing etc really made it not worth it. I didn’t mind the accounting, but the tax filling were a nightmare. The appropriate registrations to make it all legit were worse. I folded it a couple year ago. However, I’ve been thinking about booting it up again just purely as a discussion group for a few friends to discuss investing ideas.

You hit it right on with the positives. Was good to hear how different people look at a single investment.

The problem was we could never agree on anything. Each vote would be a 55-45 vote. Our portfolio changed strategies from stocks to ETF’s a few times. Overall I still learned a lot from managing money that’s not my own.