Investment clubs are groups of 12-20 people who pay a monthly membership fee (typically around $40) into a communal portfolio of around 15 stocks (most clubs deal exclusively in stocks, not mutual funds, bonds, etc.). They usually meet monthly to discuss the status of their current investments and prospective investments. Usually each member is required to look at a sector of the market and make a brief report to the club. (These reports sometimes include charts and usually take hours to prepare. If you don't do your homework, savvy club members may tear you apart with a few very pointed questions.) After a spirited debate, the club decides what to invest in based on a majority vote.

Who Are These People? 
Most investment clubs start as informal collection of friends, neighbors or coworkers. Probably the most famous investment club is the Beardstown Ladies, a group of 14 elderly women from Beardstown, Illinois who wrote a book claiming their investment club soundly thrashed the market pros. Although some nay-sayers have nit-picked their reported success, one thing is undeniable, they've made more money and learned more than if they hadn't joined the club. 

Joining an investment club may help you gain a better understanding of the market and provide you with a place for bouncing around investment ideas. Most people who belong to clubs have much larger private portfolios which they manage using their individual investment philosophy.

How Do Investment Clubs Perform? 
According to the National Association of Investors Corp. (NAIC), more than half beat the S&P stock index. One of the reasons they win is because they do extensive research and invest regularly for the long term, regardless of market conditions. Long term investing means they favor quality stocks with good track records. Their portfolios are diversified across many sectors. They also reinvest dividends.

The bad news is that about half the clubs break up after 18 months because of disagreements over investment selections. The investment clubs that under perform the market usually do so for the same reason individual investors do; they often fall for "hot" Ralph-Kramden-get-rich-quick investments. It didn't work on The Honeymooners, it won't work for the club either. 

So Why Doesn't Everyone Join A Club?
Well, established clubs (in existence for more than 18 months) have little turnover and long waiting lists. Your best bet is to find a new club just starting up or to start one yourself. Contact the NAIC for help in finding or starting a club in your area. (www.better-investing.org)