Bensman Risk Management, Inc.

Insurable Interests

Bensman Risk Management, Inc.
2333 Waukegan Road Suite 275
Bannockburn, IL 60015
847-572-0800 Phone
847-572-0502 Fax

Insurable Interests may offer general financial, insurance, tax and business ideas. However, due to the ever-changing tax laws as well as the complexity of the financial industry, you should seek professional advice before implementing any of the ideas contained in this newsletter. The Bensman Group, Bensman Associates Ltd., Bensman Risk Management, Inc. or Schemata, L.L.C. assumes no liability whatsoever in connection with the use of this newsletter.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS). Kestra IS and Kestra AS are not affiliated with The Bensman Group, Bensman Associates Ltd., Bensman Risk Management, Inc. or Schemata, L.L.C.

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Insurable Interests

Vol. 3, Issue 11July 2008


Join the Club

You find yourself spending more time studying investments and talking about them with friends and colleagues. You enjoy learning about different companies and their stocks, and you like seeing how your ideas pan out. If this is how you feel, you are not alone. More and more people like you are forming investment clubs -- there are tens of thousands of these clubs all around the country.

An investment club can include friends or colleagues. Generally the club meets once a month to discuss investments. Members do research and present suggestions to the group. Each member contributes an equal amount of money, and the group decides how to invest it. Members share equally in any gains or losses.

Sound simple? It is, for the most part. The first step is finding the right people. Your club should have enough members to produce reasonable income and input on choices, but it should not become unwieldy. It should be made up of people who have more or less the same financial means and the same investment attitudes. Obviously, you are asking for trouble if some members are much wealthier than others, or if some members are very risk-averse while others love taking a chance.

Before you begin, clearly spell out the rules of the game. How will responsibilities related to setting up the club be handled? How much will each member contribute? How often will you meet? What is the investment philosophy? How will the research be conducted? How will expenses be paid? How will the gains or losses be assessed? What happens if a member wants to leave or a new member wants to join?

Decide on the framework of your club. An investment club can be set up as a corporation, although that can be expensive and involves a lot of paperwork to administer. Many clubs are created as general partnerships, in which losses or gains are reported on the individual members' tax returns.

You also need a federal tax ID number, and you usually need to register in your state. Check with your secretary of state for the details on registration. In addition, you will need a checking account. You can get a business account from your local bank, or you can use a brokerage that offers check-writing.

Then just follow the basic rules of investing, including:

  • Invest on a regular basis. (Monthly meetings help keep you on track.)

  • Reinvest all gains, including dividends.

  • Maintain a diversified portfolio. Most clubs invest mainly in stocks, but choose stocks in different industries to help protect against problems in any one industry.

Finally, make sure your club is well integrated with the rest of your personal financial picture. For example, if your club investments are relatively aggressive, you might want to balance them with more conservative investments elsewhere in order to keep your overall portfolio well balanced.

There are many resources available on the Web, and your financial adviser also can help you through the process, from setting up an investment club to showing you how it fits into your overall financial plan.

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