Investor groups come in many types, but they generally focus on making money by pooling financial resources and member knowledge to make profitable investment decisions. Membership in investor groups can be based on investment types or investment theory techniques, or they can depend on investor location or an investor's affiliation with another organization, like a school, workplace, or club. Some of the most commonly talked-about investor groups include angel investor groups, socially responsible investment groups, real estate investor groups, and investment clubs.
An angel investor is an investor who puts personal money into a start-up business to help it grow more quickly. Often mentioned in the business media, angel investors are different from venture capitalists, who work with larger sums of money pooled from a number of other investors. Angel investors usually put money into a business during the start-up phase, the selling phase of a new business. This stage occurs after the seed stage, which is the testing phase of a new business that is usually funded by friends, family, and personal acquaintances. Groups of angel investors are usually called angel groups or angel networks.
Investment clubs are groups of people who pool their money so they can have access to higher-value investments. Usually, these clubs are run democratically, and investments are chosen by a vote of the members in the organization. To avoid having to register with regulatory agencies like the United States Securities and Exchange Commission (SEC), all of the members of the organization must contribute dues and participate in trades made by the investment club.
Common techniques used to help garner a better return on investments include technical analysis, fundamental growth analysis, and fundamental value analysis. An investor using fundamental value analysis makes money by buying low-value, bargain stocks that the investor believes will increase in value. The investor looks at many aspects of an investment, including past performance, to determine whether the investment is likely to grow in value. Fundamental growth analysis is similar to fundamental value analysis, but does not focus on undervalued stocks, which means the investor might put money into an investment that has already become successful but is expected to continue to grow in value. These groups are most often joined by investors who wish to group with other investors using similar investment theory techniques.
Some investor groups specialize in socially responsible and progressive investments. One risk in group investment is that the recipient of an investment may use the funds to make contributions to other groups, which may have values with which members of initial investment group disagree. This can sometimes cause embarrassment for investor groups if they publicly invest in companies that make controversial political donations. It is often difficult to get full disclosure of contributions from a company, even for an investor whose money may have indirectly gone into the contributions. Careful research of a company's past contributions can provide clues that help investor groups avoid putting money into companies that make secret or questionable political contributions.