Every club must have rules in order to sustain itself and as a means to establish order. Money clubs are no different and the rules that are decided upon by members are often what keep things in line during trying times. These rules, sometimes called bylaws, help to designate what course of action should be taken in instances where greed, money, and emotion could otherwise cloud human judgment.

Preservation of Interest

One of the most important rules that must be established is the penalty that is imposed for early withdrawal of funds from the club. After all, decisions are made based on the assumption that certain funds will be available for the group’s investing goals and strategy. When investors are allowed to pull these funds out prematurely the group’s ability to carry through with current investing plans can be severely damaged. Therefore, it is imperative that an early withdrawal penalty be established that will be stringent enough to cause most people to stay committed to the club once they have joined. On the other hand, the rule should not be so harsh as to hit a member with a complete loss should they decide they have truly made a mistake and want to cash out.

Investing Rules

To eliminate confusion at club meetings and to narrow down the scope of the research that is done by the members there should be rules in place that limit the types of investing options that can be brought before the club for discussion. This will save time and will help to keep members on the same page in regards to the investing strategy that is at the core of the group. For example, a group might choose to place limits on the minimum share price of a stock that can be invested in by the group.

Distribution of Responsibility

A clearly written distribution plan should be in place before starting a money club. This will ensure that profits are evenly and fairly distributed amongst members or that financial losses are evenly dispersed throughout the group as a whole. Such rules will eliminate future conflicts as each new member of the group should be required to read the rules and sign off on them upon joining the club.