As a certified financial educator and Instructor, Tomie Balogun has a lot of experience in investing with friends. While pursuing her MBA, she and a few classmates started an investment club.
Their passion to achieve financial freedom and make an impact on society saw them successfully invest in various small businesses and assets.
However, investing with friends hasn’t always been that easy. Like Tomie, many people have had bad experiences either loaning money to a friend or requesting for a loan. The conclusion: money and friends are a horrible mix!
However, the question many ask, is it still worth investing with friends or anybody else?. Tomie gives us tips on how to make this work.
The Power of Many
Think about the way you ask more people to contribute money to a party, so everyone can have more food options. Investing with other people helps increase the number of resources you raise and strengthens your financial future.
Investing in Bigger Things
Co-investing in an investment club gives you the opportunity to invest in bigger opportunities, share risks and share higher returns as well. For instance, while real estate is a great asset class that always appreciates, not a lot of young people can invest in it.
However, if 5 or more people decide to come together and invest, they will have more cash. Over time, they can earn returns from their initial investment and continue to flip multiple real estate deals. That’s a better option than waiting till your 40’s to eventually own real estate.
Choosing the Right Team
You might be thinking, co-investing or starting an investment club is great but what about the emotional issues that come with investing with friends or colleagues at work? This can be tricky!
The first thing you need to do while selecting partners is to avoid sentiments. You need to make sure that you choose your partners with clarity and objectivity. When identifying people, choose partners who are disciplined with spending money and more importantly, have a strong sense of integrity.
Shared values are very important when co-investing.
Details, Details, Details!
First, you need a legal structure in place to protect everyone’s interest. When this happens, you limit liabilities in investment deals. You can register your club as a limited liability company or a limited partnership.
What’s important is to make sure you have the papers to support your words if things go wrong.
Secondly, they say the devil is in the details. In creating your legal documents and other admin paperwork, make sure you don’t skim through anything.
Practice good financial bookkeeping, assign roles to manage tasks and create a constitution! Remember all information can be important!
Make that Money Work
Once you sort your membership and legalities, you can then start contributing money. Don’t set unachievable contribution rates, but set goals that everyone can work towards. If everyone believes in the goal, they will eventually build it too.
At the end of the day, there are many options to invest. However, investment clubs are both great for collaborative investing and also fun! They are a smarter way to take advantage of the power of many to achieve your wealth goals sooner.
So as soon as you can, get your motherland moguls into formation and start co-investing together towards your financial freedom.