5 Reasons for Making an Investment Club Your Next Side Hustle
September 14, 2019
Originally published on www.youngupstarts.com.
When you hear about investments, stocks, trading, bulls and bears, you might feel a bit intimidated, even confused. It’s understandable. Without enough money, knowledge or confidence, it can be tough to get started.
The stock market has historically been a long-term source of wealth creation, but due to a widening wealth gap, has become largely inaccessible to young people. The majority of entrepreneurial-minded people have forgotten about the stock market as an alternative to their next side hustle. While 4 in 5 millennials currently have money in savings, only 1 in 2 are investing. Without action, an entire generation could miss out on the long-term capital gains of investing in the stock market. For those without bags of money or experience, an investment club can be a great way to get started.
In investing, as in life, more heads are better than one. Investment clubs – once the domain of the wealthy – now are available online, knocking down barriers to entry that traditional investment clubs once had.
1. More Heads Are Better Than One.
One of the biggest mistakes a novice investor can make is having an undiversified portfolio. Understandably, it’s difficult for just one person to monitor thousands of stocks on the market.
Investment club models allow you to leverage the wisdom of a crowd and grow through achievements and learnings in the market. Whether you have a friend who is an expert on technology trends, green energy or minerals, an investment club can help a portfolio cover its bases in investments.
2. Low $$ Barrier to Entry.
For equity trading, the general rule of thumb is to start an investment portfolio of at least $1000. However, the issue for many people starting out in their careers is that $1000 might not be feasible. However, with an investment club, splitting the costs of getting started can allow people to start investing earlier with less cash.
3. Easier Than Ever.
Before smartphones, starting a traditional investment club was a difficult and lengthy process. Meetings with brokerages, banks and lawyers made this type of account less popular over time. Now, apps have streamlined the process and eliminated the need for face-to-face meetings. You can start an investment club from the comfort of your home in five minutes.
4. Build Compound Interest for the Long Term.
No matter which type of investment account you choose to open, remember that it is important to get a head start. Compound interest is a concept every novice investor should understand, as the people who reap the most benefit from their investment accounts are the ones who start early.
5. Actually Learn How to Invest Your Money.
Traditional investment clubs improve their members’ understanding of the markets and ensure they didn’t miss out on opportunities identified by peers. Technology now enables a far more powerful iteration: a record of all your personal decisions. Seeing how your club performs against what would have happened if everyone had listened to you is fun and informative.
More importantly, as far as your wealth is concerned, transparency enables the voices of those who consistently make good decisions to be taken more seriously by the investment club, and for you to gather insights in real time from the top performers across the community.
While there are other alternatives to start investing like robo-advisors, users typically underperform slightly in the market due to management and ETF fees. With set goals in mind and an entrepreneurial attitude, investing with friends, family and co-workers can be an eye-opening experience. Everyone gets to learn something new and shares a mutually-vested interest in success.
Ready to start your own investment Club? Download Voleo and invite your friends today!
Disclaimer: If specific securities are mentioned they are for illustrative purposes only and such mention shall not be seen as a recommendation to buy and/or sell. None of the opinions expressed by Voleo or participating guests should be construed as investment advice. Securities offered through Voleo USA, Inc. Member of the Financial Industry Regulatory Authority (FINRA), Securities Investor Protection Corporation (SIPC). Security products are not FDIC insured, not bank guaranteed, and will fluctuate in value. We do not solicit, recommend, or offer investment advice. Voleo USA, Inc. is a wholly-owned subsidiary of Voleo, Inc.