Let’s have a look at the three broad categories of investing and look at the advantages and disadvantages of each.

Passive Investing

Passive investing is when you put the investment decision making into the hands of someone else, ideally an expert investment manager.

The advantages of passive investment are that you are not required to have any investment expertise and you don’t have to invest your time, only your money. The disadvantages are that firstly you have relinquished your control over your money and secondly the returns for these types of investment are usually uninspiring.

Common examples of passive investing are savings accounts, government bonds, property trusts and mutual funds. Most people invest for their retirement under some form of passive investment that usually has special tax concessions which vary from country to country.

Active Investing

With active investing you take an active role in managing the investment. This form of investing could have a long term focus such as a buy and hold share portfolio or it could be a short term focus such as futures trading.

To do well in active investing you need to have considerable knowledge of the investment vehicle or vehicles that you are using. You also need to understand the basic principles such as when to collect profits, when to cut losses and how to analyze the market. You also need the emotional strength to apply these strategies as required (this is often the most difficult aspect of active investing).

The advantages of active investing are that you have greater control over your investment than you do with passive investing and the potential for profit is theoretically higher. The disadvantages are that you need to invest time in acquiring knowledge and skills and in managing your investments and also that the potential for loss is also generally far greater than in passive investing.

Common examples of active investments are share, options, futures, and currency trading, buy and hold share portfolio building, buy and hold residential or commercial property, and property trading.

Creative Investing

With creative investing you actually change the investment in some way that is designed to manufacture profit. This form of investment requires a lot of skill and experience but if you have that skill and experience then you can create huge profits by being able to visualize what your investment could be once you have applied your imagination to it. For this reason creative investing is often described as turning thought into money.

For example if you are a property developer there is a huge variety of possible developments that you could design and build on a particular piece of land. Amongst that huge set of possibilities there are also a huge range of potential outcomes ranging from high profit to huge loss and including all the points in between.

The advantages of creative investing are that it has the highest profit potential and the highest degree of control and flexibility. The disadvantages are that it requires the highest degree of knowledge, usually involves borrowing large sums of money and also has a huge potential for large losses if you get it wrong.

Common examples of creative investments are property development, property renovation, business renovation and new product development and marketing.

When you are deciding which of these three broad categories best suits you need to consider your knowledge and experience, your strengths and weaknesses, your access to resources, including time and money, and in particular you need to consider your personality including your time management skills, decision making skills, tolerance for risk and your self discipline.

There are of course many expert consultants to help you in each field and many sources of knowledge and experience to tap into.

I hope that this article was useful in helping you see where the various types of investments fit into the scheme of things.

1 Local vs. online investment clubs

If you enjoy socializing or face-to-face interactions, then joining a local investment club may be the best option for you. Members typically meet once a month. Local investment clubs often invite investing professionals or experts to speak at meetings. These talks are excellent opportunity for members to learn from others’ investing experience and to ask questions.

You can easily find local investment clubs through word of mouth. Ask colleagues, neighbors, friends and relatives for recommendation. Chances are they may belong to a local club or know of someone who is a member of a local club.

Online investment clubs offer convenience. They usually have virtual chat rooms or forums where people can post questions and answers. If you don’t have as much time to mingle with others or attend local meetings, then you may be suited to joining an online investment club.

2 Investment capital

Determine how much you can afford to invest. Some clubs have set minimums that must be met for investments. The beauty of investment clubs is that members pool their money to invest jointly. So, you don’t need to have massive capital to begin investing.

3 Investment period

Make sure that you find out how long your money will be tied up before making any investments. Some clubs have set rules on the minimum length of time for an investment. Don’t get stuck paying a penalty that will negate any potential profits from your investment.

4 Beware of scams

Get rich quick schemes are abound, especially on the Internet. If something looks too good to be true it probably is. Most legitimate clubs don’t charge joining fees. Before joining an online investment club, check out its reviews by other members. Determine how long the club has been running and its investment performance.

5 Read the fine print

Before signing anything, read everything over thoroughly. Be sure that you understand your commitment and are comfortable with the terms and conditions of the investment club. Check for any hidden fees or penalties for early withdrawals.

Investment clubs can be an interesting and fun way to learn and invest. As long as you make wise decisions and keep a diverse portfolio you will likely be able to make some decent profits through your investment club.