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Your Investment Club's Operating Agreement or Bylaws

Every group needs rules that all members of the group have agreed upon. This allows everyone to know the other members' expectations, and provides a forum for disagreements. For example, if every member is supposed to prepare one report per month, and one member continuously has not done his or hers, other members can point to the agreement and remind the forgetful member that preparing reports was an agreed upon task. It allows disagreements to be handled like adults, and avoids many issues by deciding first how to handle the running of the club.

This should include the club's policies on:
• How much the monthly contributions are: most clubs have monthly contributions between $20 and $100. $20 seems to be the most common. Whatever your amount is, everyone in the club should agree to it. You may also wish, if everyone in the club is younger, to have a method by which the club can decide as a group to raise the monthly contributions, perhaps after 5 years or some other predesignated amount of time.
• When the meetings are and how often. If the meetings are not held in members' homes, where are they held?
• What positions there are within the club. Most clubs have a president, vice-president, secretary, and treasurer. You may also have someone who is responsible for coordinating extra educational activities, such as guest speakers. You should describe what each role entails, and what tasks every member has to do. Also, how often are roles reassigned or re-elected?
• A basic outline of the budget, or guidelines for how the budget will be set and agreed upon.
• Guidelines for liquidating assets - while members should understand that investing is a long term process, sometimes events occur and a member needs to withdraw. However, there may be a penalty for early withdrawal (except under extraordinary circumstances), as the first couple of years can be very fragile for a club's portfolio.
• Guidelines for adding new members - will new members buy in, which can be prohibitive if the club has been running for several years already, or will new members contributions be pro-rated, which might be difficult to figure out, but a new member might simply own less shares than everybody else?
• If the club dissolves, how will it dissolve? Who will do what, or will someone else be hired to divide up the assets?

It should also record initial membership dues and contributions.

Your operating agreement may include more details, depending on what circumstances your members think are likely to occur.

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