Answer:
All are benefits of investment clubs:
- I. Small investors can pool their money to build a portfolio. TOTALLY TRUE
- II. Members can share research responsibilities. OPTIONAL, NOT MANDATORY
- III. Individual members may have different goals and tolerance levels for risk. THAT IS WHY A MAJORITY VOTE IS REQUIRED
- IV. Investment clubs typically buy stocks for the long term rather than short term profits. MOST INVESTMENT CLUBS GENERALLY INVEST FOR THE LONG TERM
Explanation:
An investment club is something like a mini mutual fund, and in order to avoid problems between the members it is generally organized as a partnership or limited liability company. The main advantage of investment clubs over mutual funds is that they do not charge heavy management fees.
But the main disadvantage of an investment club is that due to its size, the possibility of losing is much greater than a mutual fund since it is not as diversified. Of course, that results also in a greater possibility of making higher profits.
Since investment funds are not professionally managed like mutual funds, they are more democratic and every investor has the opportunity to voice their opinions about what should be done. Its success is determined by the ability of its members. They are also not allowed to search for new members, since that would be considered an investment scheme, which is not illegal, but is regulated differently.
Investment clubs are loosely regulated, and of the few regulations that the SEC imposes is that all decisions need to be made by a majority of votes. As in any type of organization, individual members may have different idea and levels of tolerance, in this case some members will prefer more riskier investments, others will prefer safer ones, but the only requisite is that they are decided by voting. The strength of investment clubs relies on the diversity of education, knowledge and work experience of its members.
