7 Reasons Why Investing Is Better With Friends

If you’ve ever played on a sports team, you understand the power of working together towards a common goal. Whether you’ve assisted a goal in soccer or collaborated on a strategic volleyball play, you can appreciate that better decisions are often made as a group. While Steph Curry might be an all-star on his own, he wouldn’t be able to shoot winning baskets without support from other Warriors.

When it comes to investing, you can take the same team-based approach to make smarter financial decisions. By starting an investment club, you can collaborate with the people you trust and pool your resources, knowledge, and wealth together to achieve greater together. If you need more motivation, here are 7 reasons why investing is better with friends:

1. You’re Not Alone

Dealing with a complex subject alone can be stressful and frustrating. Without the right support, it’s easy to feel discouraged, intimidated, or confused, to the point where it can feel easier to give up altogether. Investing shouldn’t be an intimidating, confusing, or discouraging experience. Quite the opposite, it should be exciting and fun!
In an investment club, you don’t need to know everything. With help from your team members, you can collectively navigate the investing process, share your past experiences, and collaborate on trading decisions together.

2. There’s More Motivation

Motivational speaker Jim Rohn famously said that we are the average of the five people we spend the most time with. Whether you realize it or not, spending time with people who are interested in investing can help you accelerate your learning process and stay diligent with your investments.

Motivation is one of the main reasons we need our friends. Good friends push us to achieve more, live happier, and be better – so, why not support one another on your collective pursuit to financial freedom?

3. You Make Better Investment Decisions

Acting as a collective group, rather than an individual, allows you to make more informed decisions and provides the confidence and empowerment to continue investing and growing your portfolio. Investment clubs allow you to learn from people you trust, which is one the greatest ways to develop both as an individual and as an investor.

4. There’s a Diversity of Interest

The interests of our friends are typically diversified across a variety of different activities, hobbies, and industries. For instance, you likely have a techie friend you turn to for all your computer bug needs, or a car fanatic for when you need to fix a flat tire, and so forth. The same benefits of diversification apply to investment club members – individuals who are well-versed on a particular company or industry can be tapped for their expertise, which ultimately expands the entire group’s knowledge and investing opportunities.

5. You Reduce Risk

By investing together, you have a much greater opportunity to diversify your position because there is greater capital that can be distributed among investments and more diversified interests as we discussed above. Diversification mitigates concentration risk by providing a safety net; if there is volatility in the market, it can affect your portfolio, but you are exposed to less extreme jumps than if few stocks are held. In other words, portfolio diversification is one of the smartest ways to minimize risk and help your club members reach their long-term financial goals.

6. The Returns are Shared

More people can mean more capital, which translates into bigger opportunity for returns. Having more capital available to invest allows you exposure to trade with the authority of a large portfolio and gives you access to a greater mix of stocks. Let’s not forget, working towards make a successful decision and reaping a financial rewards as a team is a great bonding experience. On the flip side, when mistakes are made, you have an opportunity to learn about the market so you can make better decisions moving forward.

7. You Stay Committed Long-Term

While the first rule of investing is simply to get started (the sooner the better!), the second rule is to stay in the game. Ever heard investors who purchased Apple in the early days moan about how much they’d have made if only they’d held the stock? Certainly hindsight is twenty-twenty, but when you look at the overall performance of the market, over one, five, or ten years, the trend is an upward line – performance has grown year over year.

Market corrections are inevitable, but can serve as an excellent opportunity for young investors who are able to take advantage of the decline. Keep in mind that market corrections have always been followed by recoveries, as economic cycles shift and earnings grow. One method is to use dollar cost averaging, where you end up with more stock if you buy consistently, rather than trying to pick a single entry point.

Stock market investing deserves the knowledge of your friend group because while no one has the right answer to everything, we all have a vested interest in succeeding. Start an investment club with your group of friends, share your resources, and make better investment decisions together!

 

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