Topic: How To Invest

Dear Pat, I would like your words of wisdom re: investment clubs. I did read a bit in your book, Riding the Bull, but could you please give a few reasons for and against, and mainly pitfalls to avoid. It has been some time that I have been enjoying The Inner Circle. As a long-time subscriber to Successful Investor, it is what I expected it to be. Good solid advice, only more of it.

Article Excerpt

A: Many thanks—it’s always a pleasure to hear from a long-time happy subscriber! I’ve heard good and bad things over the years about investment clubs. First off, you need to keep in mind that the term “club” can be misleading. For many people, it conjures up the image of a non-profit, co-operative affair, run by and for the members. However, clubs of any sort—health clubs, book clubs, golf clubs and ski clubs, to name a few—may actually be private businesses. Some investment clubs are purely social. Others call for cash investments from members. I’d have to say that investment clubs can be a good way to learn about investing, gather investment information, and perhaps make valuable connections with other investors. But they are a bad way to invest any more than a token amount of your money. Investment clubs make investment decisions by committee, where responsibility for mistakes is diffused. When committees make mistakes, they sometimes make big ones. Investment clubs can offer social…