Why to start an investment club with classmates
Written by Kevin Bain, David Laszcz and Allison Voss, co-founders of Better World Finance LLC and Masters in Public Policy 2020 graduates from the Harvard Kennedy School of Government
Hands down the best part of graduate school were the friendships: the people we met by randomly sitting next to each other in econometrics, bumping into one another at a career fair, or running on treadmills next to each other in the school gym. Through working on complicated problem sets, sharing late-night conversations about politics and global affairs, or haphazardly stopping by events for the free wine, these strangers became friends.
Then with little warning, the pandemic threatened our friendships right before graduating and moving away to different cities. When the world suddenly shut down, canceling graduation and preventing us from seeing dear classmates one last time before proceeding to our next chapter, how could we make sure we stayed in touch? Our answer: put our money together in a registered LLC and legally bind ourselves to regular meetings for each other and also for a greater purpose.
It sounds extreme, but the three of us decided to form an investment club following graduation. We highly recommend others do the same to accomplish three goals – stay in touch, grow together, and develop an investing philosophy.
With one classmate re-entering public service, the second relocating to Colombia, and the third returning to Detroit, the odds of seeing each other again looked precarious. Hanging out over zoom, reminiscing about our times together, we spun tales of more memories we would have shared. Then someone mentioned how much money they made on Zoom stock; another pitched Delta’s plummeted price as a great opportunity. Why not do this together? Thus, we founded Better World Finance.
An investment club is simply a group of people who collaborate on investing. It can remain as casual as merely discussing ideas but can range to a fully-formed company with managing and limited partners. We struck a balance, opting to create a fund with a straightforward structure (votes proportionate to contribution) and an LLC partnership (pass-through income so each individual is responsible for their share of taxes).
As any founders should, we talked at length about our goals and rules. The goals to invest in democratic values, energy sustainability, that embody a sense of private values for a public impact, and are nonpolitically backed organizations. The rules being: meetings every other month; everyone to make one pitch per meeting; and two-year commitment. We coined our mission, “Respect one another. Respect the earth. Respect our future.” With that, we locked ourselves into remaining friends for at least two years.
Growing together became an obvious opportunity, both financially and personally. For now, we invest in stocks because they are highly liquid and require only small amounts of money. In the future, though, we hope to invest in grander projects, such as affordable housing or social enterprises. Doing so requires more sophistication, which we are gradually building.
And when you talk about money in a group, you naturally discuss careers and salaries. We dedicate the start of our meetings to exactly this topic, listening to each other’s successes and challenges, providing both an ear and advice at times. While meetings include investment pitches and a portfolio review, we always add additional space for learning and collaboration, whether it be a discussion on cryptocurrency or edtech, interesting books, or challenges at our full-time jobs.
Founding an investment club does not require much money, but rather a collective commitment to a mission, time dedicated to contributing to that mission, and a desire to stay connected with friends with a shared cause. Creating Better World Finance has been one of the best decisions we made post-graduate school to stay in touch with each other and test new ways of living our values.
Ultimately, investing in friends closely resembles investing money. It takes time and attention, has ups and downs, but the payoff when done right makes it all worthwhile. We recommend classmates consider starting an investment club as a creative way of maintaining close friendships, personal growth and collaborative learning.