In recent columns, I’ve covered topics that appeal to clubs that are already fairly well established, like finding a great company and buying that first share of stock. This time, I’d like to take a step back and talk about one of the biggest issues a newly-forming club faces: choosing its members.

On the surface, it seems like this would be one of the simplest steps among the ones that a new club must take in order to get up and running. But selecting the people with whom you will be meeting on a monthly basis for (hopefully) many years to come and discussing what the club should and shouldn’t be investing in is a delicate process. That’s what makes choosing the people who will be by your side (or around your kitchen table) one of the most important steps – if not the most important step – in building a strong foundation for your club.

So, if you’ve already done your homework and decided that starting your own investment club is for you, how do you decide who you should take along with you on this journey? While there’s no black or white answer to that question, I can most certainly offer you some words of advice to help guide you down the right path.

Where to Look
This is the easy part. Start with the places you know best, such as your home, work, neighborhood, place of worship, and any other location where you regularly meet and socialize. Are you on a bowling league? A member of the PTA or the Neighborhood Watch? And don’t overlook the obvious – your family members. There are a large number of family investment clubs that use the format to not only stay connected, but to allow the older, wiser folks to pass on their knowledge of money and investing to the younger generation.

Now, get out a pen and paper and make a list of all the people you think might be good candidates for your club. That begs the next question – who are you looking for?

Who to Look For
Just as with any other organized group, you are looking for people who will enjoy each other’s company, share a common philosophy of building a successful, long-term investment portfolio, and, along the way, be willing to pitch in and do their fair share of the work. Some of the desirable characteristics of a potential investment club member include (but certainly aren’t limited to) someone who is:

·        Open-minded (How might he or she react if the club says “nay” rather than “yay” to his or her stock purchase idea?)

·        Curious (Does he or she believe learning is a lifelong pursuit?)

·        Enthusiastic (Can you count on him or her to see the upside, even when the chips – or as the case may be, the stock market – is down?)

·        Dependable (Can you depend on him or her to regularly attend meetings and contribute monthly dues?)

·        Takes Initiative (Will he or she be an active participant in all facets of the investment club’s duties, from conducting stock research to serving a term as a club officer?)

Duly Noted
It might seem as though looking for people who are just like you would be the right answer. And while having something in common with your partners certainly isn’t a bad place to start, keep in mind that diversity can be a real boon to an investment club. This doesn’t mean to look far and wide for people with whom you have nothing in common. Rather, consider people with whom you share a common thread, but who also bring something new to the table.

For the past five years or so, I’ve belonged to an unofficial “Girls’ Club” made up of six ladies who get together every other month for a night on the town – nothing more, nothing less. We just simply enjoy being together.

It would seem that a group that doesn’t meet for a stated purpose – like knitting or reading or investing -- would be ripe for attrition once the initial enthusiasm waned. Yet each of us makes it a point to attend every single get-together. Every single one.

So, after giving it some thought as to why we’re such a committed group, I’ve come to the conclusion that it’s a combination of what we have in common – as well as what we don’t. The six of us went to high school together. Some of us were very close friends back then, others of us merely acquaintances. All of us have a shared hometown and history. But, since that time, we’ve each branched out in very distinct directions. Some of us have kids; others don’t. Some of us live in tightly-knit neighborhoods, others moved to the country. Each of us has pursued a different occupation.

For a social club like ours, our differences make our gatherings fun and interesting. For an investment club, diversity among members often leads to a variety of investment ideas, lively discussions, and a well-diversified portfolio.

What Next?
Once you’ve established the who, you’ll need to take the next step – recruiting members. While mentioning it around the coffee pot at the next PTA meeting is one way to do this, it’s not the best way. A much better alternative is to hold a meeting for prospective members and to provide each with a copy of an information packet that details what an investment club is – and isn’t -- all about. I’ll give you an overview of how to do this in my next column. In the meantime, I’d love to hear suggestions and ideas from the more seasoned investment club members out there.