Basic forms of investment clubs

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An investment club (or investors club) is an association of private investors with the aim of the
joint investment. The common assets of the club are normally injected through
club-denominated deposits in which the individual members are involved.

Investment clubs usually raise funds from their members to invest in a particular area as a
group in a single club portfolio. With the rise of computers and the Internet, investment clubs
have also moved into cyber space.

These clubs are usually formed as a general partnership, but can also be formed as a limited
liability company or limited partnership. Although they may be established as a company, the
double tax corporate structures tend to be undesirable in comparison to a partnership.

It is important to distinguish between:

    - Regional clubs, which usually consist of a manageable number of members who know
each other, either on personal level or have met through the club.
    - National clubs with hundreds of members and a separate investment committee with
professional structures

The lack of legislation in many countries that sustain and regulate the establishment, objectives,
and especially the management of common funds is a serious concern. This is because
investment clubs can be used as a vehicle for the provision of advice or unauthorized financial
intermediation. Apart from that, lack of legal limits on joint fund management joint, may be
severely neglected translating into huge losses for all members.

The first recorded investment club existed in the 1800s, and in recent years online communities
began to emerge and have contributed to the growth of private investment in the United States.

One of the reasons people join the investment club is to learn how to invest. Investment clubs
also focus on education as a tool for novice investors. The club can offer structures and support
needed by many people to start investing, and clubs allow individuals to start investing without a
large amount of money.

There are different reasons for establishing or joining an investment club:

    - Pooling of smaller amounts
          - to spread risks
          - minimum investment amounts entry requirements
          - optimization of fees, as most banks charge fees for declining order volume
    - Pooling of knowledge of financial markets and mutual learning

Many of the regional investment clubs are used sometimes in addition to these primary
objectives, but also for social gathering. Savings club are also mostly informal, it is usually for
them to be registered as associations or a society.

				
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