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How big is the market for investment clubs in the US?
Hello! Thanks for your question about the market size for investment clubs in the U.S. The short version is that after searching extensively through investment club association websites and reports, news articles, college and high school websites, and government sources, I’ve determined that the information you requested is not publicly available because there are no research reports on the topic and numbers of clubs are not publicly tracked. However, I was able to learn the current number of clubs registered with BetterInvesting, about the decline in investment clubs over the past two decades, and some data on high school and college clubs. Below you will find a deep dive of my methodology and research along with suggestions for possible continued research.
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METHODOLOGY
I began by familiarizing myself with investment clubs to ensure I was researching the correct terms. Next, I search for industry, government, or academic reports that list the total number of investment clubs in the U.S. I determined that no such reports publicly exist. I then scoured the websites of BetterInvesting (formerly the National Association of Investors Corporation NAIC) and the Future Investors Clubs of America (FICA) for information on adult and high school clubs. I could not find a similar association for colleges, though did find that College Investor has an information section on investment clubs and there is continued interest in such clubs on college campuses particularly among undergraduates. I also reviewed some college and high school websites, but found no over-arching statistics.
Finally, I searched through news articles and was able to pull some useful data to establish the current number of BetterInvesting members.
CHALLENGES IN TRACKING INVESTMENT CLUBS
Per a Google Scholar search, it appears that little research has been done on investment clubs, particularly in the past few years. Market data is particularly hard to determine because clubs are not required to register with the U.S. Securities and Exchange Commission or with investment clubs associations like BetterInvesting (formerly the National Association of Investors Corporation NAIC) and the Future Investors Clubs of America (FICA). Such associations do not publicly share the number of members they have. That said, I was able to pull some useful information from the FICA website that points to the continued prevalence of high school clubs. I was also able to pull the
From past and current news articles, I learned that investment clubs had their hey-day in the 1990's but have significantly declined in the past two decades. This sharp decline may be why BetterInvesting no longer publicly reports their number of members and why there is little data on the topic generally.
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HELPFUL FINDINGS
DECLINE IN INVESTMENT CLUBS
Investment clubs were particularly popular in the 1990's. At its peak in the mid-1990's, 500,000 Americans were NAIC members. Today, BetterInvesting (NAIC's new name) currently has 42,000 members, a 91.6% decrease.
The average investment club has around 10-15 people. Using this range, in the 1990's NAIC had approximately 33,333 - 50,000 clubs registered. Today, there may be as few as 2,800 - 4,200 registered clubs.
Although NAIC's membership does not comprise all investment clubs, experts associate its declining membership with an overall decline in investment clubs. A 2013 Forbes article, linked this decline to the financial crisis, which caused many members to stop investing. For example, a women's club called Formerly Baroque was previously earning a "16.55% return on its investments," but within a year, during the crisis, they lost over 40%. A club member shared with Forbes, "I think we all noticed that the dynamics did change, from going to the meetings and having a lot of fun and just laughing about ‘Well, do we buy this stock or that stock,’ ... (Later) we had to really stop and analyze whether or not we should even buy stocks at all.”
Meanwhile, a recent 2016 Epoch Times article states that investment clubs were a "victim of the Internet." The Internet allows people to research stocks more easily and act more quickly. Moreover, investment clubs were a social activity that no longer works as well in the Internet era where people increasingly socialize online.
In addition to the NAIC registered members, I founded a list of 808 investment clubs on Manta that are registered as companies/LLC's. It is impossible to know which of these are registered with NAIC and, again, this list represents only a subset of the total number of investment clubs in the U.S. That said, I include it here in case it is helpful.
FUTURE HOPE FOR CLUBS?
While investment clubs are declining, the benefits of investing in a group still exist including: mitigating risk, leveraging people's diverse backgrounds for stronger decision-marking, shared learning, and socializing. Online social networks may be an opportunity to resurrect the investment club, as people still look to others for guidance and younger people are looking to learn how to invest in increasingly "complex financial markets." If there is to be a resurgence in investment clubs, though, they will have to function a little differently with interactions more likely to be online than in-person.
It is too early to tell if there will be such an online resurgence in investment clubs, but I found it interesting to notice the tone of articles I found. Articles from the 1990's are upbeat and positive about the popularity of clubs, articles in the late 2000's-2013 are more pessimistic, and articles in the past two years are more forward-looking and place emphasis on the role the Internet will play.
SCHOOL CLUBS FOR CHILDREN
High school investment clubs seem to be separate from the general investment clubs associated with BetterInvesting. Historically, they were a smaller group compared with the adult population. A 1996 Wall Street Journal article stated that while 500,000 people were NAIC members, only a "handful" at high schools had clubs.
FICA states that its school clubs are for kids age 8-19, meaning some clubs are for children younger than high school. While FICA does not list its total number of registered school clubs, it appears to have members in all 50 states plus Washington DC. States have between 1 (Hawaii) - 30 (Alabama) cities with school clubs. I entered the number of cities with FICA investment clubs into this spreadsheet.
There are a total of 310 U.S. cities with school investment clubs registered with FICA. We could conservatively estimate that each city has 1 FICA club, but as each city has many schools, it is likely that some have multiple clubs. If we conservatively estimate that on average cities have 2 FICA clubs, there would be 620 FICA clubs in the U.S. or 15% - 22% the number of NAIC registered clubs.
The average FICA club has 10-25 members, a larger range than adult clubs. Using my 620 guesstimate there are 6,200 - 15,500 children in FICA-registered investment clubs in the U.S. As not all school clubs register with FICA, these estimates reflect a portion of the total school investment club population.
Generally, school clubs for ages 8-19 focus on student financial learning and college preparedness. Unlike college clubs, high school clubs don't usually manage real money. However, Greenhill School in Dallas gave its student's "Business Club" $100,000 to invest in 2013. The school felt that otherwise students were not truly learning about the stock market.
COLLEGE CLUBS
While I was unable to find any associations of or data on college investment clubs, I found several articles that indicate that investment clubs continue to be popular at universities. College clubs focus on "providing real world experience for students" interested in finance through "stock market simulations," experience in "portfolio management," Wall street boot camps, and competitions. College clubs provide various activities, but are generally run by students, primarily attract undergraduates, and are often led by "a faculty advisor independent of the university."
Some clubs, like the Ross School's Michigan Interactive Investors (MII), are highly selective and offer members opportunities for internships, jobs, and access to recruitment from mutual funds and hedge funds. MII also hosts an annual Undergraduate Investment Conference, which brings invited clubs from 20 top universities together for a "stock pitch competition" and networking. I tried to identify which schools attend this conference, but there is no such list on the conference website.
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POSSIBLE CONTINUED RESEARCH
In understanding what types of information are and are not publicly available on this topic, I’ve suggested a few other routes you may be interested in researching:
1) You may be interested in further exploring the shift of investment clubs to the Internet: What online groups exist for shared investing?
2) You may be interested in learning more about top school investment clubs and what they offer students. Such a question could be a competitive analysis of the top school investment clubs: Complete a competitive analysis of the top undergraduate investment clubs. This question could be modified to focus on high schools or graduate programs.
3) Alabama appears to have a particularly robust investment club scene for children with 30 cities represented on FICA. You may be interested in investigating what is happening in that state and if there are similarly robust investment clubs for adults: Please provide an overview of investment clubs in Alabama high schools. OR Please provide an overview of investment clubs for adults in Alabama.
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CONCLUSION
To wrap it up, after searching extensively through after searching extensively through investment club association websites and reports, news articles, college and high school websites, and government sources, a direct answer to your question is not publicly available because there are no research reports on the topic and numbers of clubs are not publicly tracked. However, I was able to learn the current number of clubs registered with BetterInvesting, about the decline in investment clubs over the past two decades, and some data on high school and college clubs.
If you’d like to continue research on any of the other topics I’ve outlined above, just let us know! Thanks for using Wonder!