Take a moment and think back to some of the jobs you applied for and/or actually held as a teenager. Did the idea of any of those jobs end up being more appealing than the job itself? When I thought back to my own teenage employment, one job in particular comes to mind. The pet shop.

I was in college and, like most undergraduate students, looking for a way to earn some extra bucks in between classes. That’s when I spotted an ad hanging from a thumbtack on a bulletin board in the Student Center. The local pet shop, the ad stated, was looking for part-time help. Sounded like a dream job to me. After all, I love animals and had gone to a good deal of trouble to hide the ones I was currently harboring in my dorm room. 

When I arrived for the interview, the owner was very excited to see me. (That should have been my first clue.) She walked me through the pet shop as she explained the job’s duties. We passed by cages full of fluffy newborn kittens and playful puppies. My daydreams of playing with all of these furry critters and getting paid for it were interrupted by the owner, who stopped and said, “And here’s where you’ll be spending most of your time.” I looked. She was pointing to a room at the very back of the shop which was filled dozens of cages that needed to be -- to put it politely – cleaned. That was the job. Cleaning an endless cycle of dirty animal cages.

I told the owner I’d think about it. And I did. Later on that day I called her, thanked her for the interview, and told her that the job just wasn’t for me. What I had pictured in my mind and the reality were two very different animals (pardon the pun).

Expectations
To be clear, the analogy here doesn’t have anything to do with comparing investment clubs to pet stores and dirty animal cages (yikes!). What it does have to do with comes down to one word: Expectations.

The pet store job didn’t even come close to meeting my expectations. But I was able to bow out gracefully and not waste too much of my own, or the owner’s, time because she had laid out what the job was first – before I made a commitment. In the end, that saved both of us a lot of grief.

The same holds true in the process of forming an investment club. The investment club format may or may not be the right fit for the potential members you’ve jotted down on your list (see my last column, Looking for Members in All the Right Places, 2/28/2008). And the only way to figure that out is to be sure that the club’s expectations and the potential members’ expectations match.

The Club Information Packet
The best way to do that is to distribute a Club Information Packet first – before you hold the club’s initial meeting. A Packet offers prospective members a detailed overview of what it means to be a club member and gives candidates an opportunity to say yes, they’d like to take the next step, or to politely bow out if an investment club isn’t for them.

That said, what exactly should you include in your Club Information Packet? Of course, it’s up to you, but some of the suggestions I’d offer would be:

·        A definition and explanation of what an investment club is.

·        Reasonable expectations of what a club can and can’t provide. For example, the club’s portfolio shouldn’t be a member’s sole retirement plan. And, though you can quote the average annual return of, say, investment clubs nationwide, you should emphasize that there is no guarantee that any investment club will make money – and that it could even lose money.

·        Meeting frequency and attendance requirements. A club might, for example, allow one excused absence per year and agree not to meet in July.

·        Education requirements. Make it clear that the club is as much about education as it is about profit, and that members will be expected to serve on the club’s Educational Committee and/or give periodic educational presentations.

·        Financial requirements. In order for the club to build a portfolio, members must be committed to contributing dues on a regular basis. Offer a range of possible monthly contribution levels -- say from $20-$50 – a figure the club will pin down at its inaugural meeting.

·        Rotating officer duties. Outline the club’s officer positions and duties, i.e. President, Vice President, Treasurer, and Secretary, and remind prospective members that these duties will be rotated among all club members.

·        Stock selection (a brief overview) and what a stock study entails. In addition to club offices, many clubs have a Stock Selection Committee and members also serve on this Committee on a rotating basis. If your club will use specific stock criteria and stock selection tools – such as those available through Stock Central -- this is a good place to outline that.

·        Club philosophy. Emphasize that the club’s philosophy is not get-rich-quick, but long term, buy-and-hold.

Again, these are just some suggestions to get you past the terror of the blank page and blinking cursor. Of course, you should tailor your Club Information Packet to what you see as reasonable expectations for your club and its members. In the meantime, I’d love to hear feedback on how other clubs have handled this early stage in the life of an investment club.