HOW TO START AN INVESTMENT CLUB

Three things should be kept in mind in the formation of an investment
club:  (1) Members should enjoy one another's company;  (2) Investment 
clubbing is a long term program which may last a lifetime;  (3) Variety 
in occupations or interests of members may be helpful.

To avoid fundamental disagreement at a later date, members must agree 
on the investment philosophy to be followed.  Very few clubs are 
successful in using a short term speculative approach to investing.  
Those that have amassed large sums over the years have had a long 
term investment outlook.  Goals suggested by NAIC:  Buy growth 
stocks, reinvest all dividends, invest regularly.  For the new club 
it is recommended that a different industry be studied each month.

Steps to be followed:

1.  Organize with the same investment goal.  Discuss goals before 
you organize.  Don't leave this to chance.

2.  Obtain a copy of the Investor's Manual from the National 
Association of Investors Corp.  It is strongly recommended that 
the club join NAIC.  Each member should have his own copy of the Manual.  

3.  The recommended organization of an investment club is as a 
partnership.  The Manual contains a suggested Partnership Agreement 
covering terms of operation, membership contributions, etc.  The 
agreement must be signed by all members, and a copy placed on record 
with the broker selected.  You may wish to set up "By-Laws" which will 
elaborate on operating procedure, actions to be taken with regard to 
delinquent or absentee members, percentage vote required for buying 
and selling stock, admitting new members, etc.  

4.  Pick a distinctive name.

5.  Elect officers (President, Vice-President, Secretary, and Treasurer-Agent)

6.  Select a broker, preferably one that has worked with investment 
clubs.  However, do not expect him to do the work for you.  While 
getting started, he may recommend certain stocks or industries for 
study, but as the club develops it should find its own resources for 
finding stocks for study (Better Investing, or other periodicals;  
NAIC Advisory Service, or other advisory services; the Wall Street 
Journal, or financial pages of other newspapers, for example.)

7.  It is recommended that each member subscribe to Better Investing 
Magazine through the club.  In so doing he becomes a member of the 
NAIC organization, and becomes a recipient of its benefits, in 
addition to gaining access to one of the best investment magazines.  
As an added benefit, NAIC provides a fidelity bond ($25,000 with a 
deductible) for all club members who become members of NAIC through 
subscribing, and provides for purchasing additional coverage if needed.   
Although this is not the major reason for belonging to NAIC,  there 
are a few clubs that, to their surprise, found this bond a great 
comfort in time of need.

8.  Order the NAIC Accounting Kit, consisting of an accounting manual 
for investment clubs and all the necessary forms to start a set of 
books for the club.It is strongly recommended that the club start 
using the "Valuation unit" system right at the beginning, because 
it provides an excellent but simple method of keeping track of the 
share of each member in the club, and does not require that all club 
members have equal shares. 

9.  Train all members in the use of the NAIC stock study tools.  
The material is explained in the Investors Manual.  Start with 
the Stock Selection Guide.  It is important that each member be 
a participating member.  The benefits of belonging to an 
investment club are lost to the member if he does not take 
active part in the stock studies and discussions.