Starting an investment club

finlay · 26 September 2010

Greetings,

I'm looking for some friendly advice about starting an investment club.

I'm currently a university student studying a double degree in Accounting and Finance, with one more year until completion. I currently trade my own funds and have done for about three years now. I have work experience at both brokerage firms in electricity wholesale markets and interest rate swaps, whilst also spending time an accounting firm.

My question is; a few mates and myself would like to start an investment fund(I’m not sure if that’s what its actually called, it will be run more like a democratic investment club, whereby we all have a vested interest), we would essentially just like to incorporate like minded students and invest together with each person’s funds. For arguments sake say we all invest $1000 each. Each week we gather to discuss stocks and vote on the week’s trading strategy. The goal would essentially be to make money and distribute profits evenly back to all members (would it change anything if founders took a percentage of profits as fee’s?), whilst also learning about the market and new researching techniques, relative to each person level.

I would like to be a company also, or does that complicate things? Will i need a license? Considering i will not be giving specific advice, as we all vote after group research. I will be the one initiating the trades tho, on behalf of the group.

Just to clarify my motives, this is not a scheme to just gather people’s money and trade it to satisfy my own interests. The people invited to the club are friends which share the same interests. i see it more as a learning community.

Any help or ideas is greatly appreciated, feel free to give advice knowing that I will nor act on it or hold anyone to it.

Regards

Finlay

1q2w3e4r · 26 September 2010

Re: advice with an investment club structures.

finlay said:
Greetings,

I'm looking for some friendly advice about starting an investment club.

I'm currently a university student studying a double degree in Accounting and Finance, with one more year until completion. I currently trade my own funds and have done for about three years now. I have work experience at both brokerage firms in electricity wholesale markets and interest rate swaps, whilst also spending time an accounting firm.

My question is; a few mates and myself would like to start an investment fund(I’m not sure if that’s what its actually called, it will be run more like a democratic investment club, whereby we all have a vested interest), we would essentially just like to incorporate like minded students and invest together with each person’s funds. For arguments sake say we all invest $1000 each. Each week we gather to discuss stocks and vote on the week’s trading strategy. The goal would essentially be to make money and distribute profits evenly back to all members (would it change anything if founders took a percentage of profits as fee’s?), whilst also learning about the market and new researching techniques, relative to each person level.

I would like to be a company also, or does that complicate things? Will i need a license? Considering i will not be giving specific advice, as we all vote after group research. I will be the one initiating the trades tho, on behalf of the group.

Just to clarify my motives, this is not a scheme to just gather people’s money and trade it to satisfy my own interests. The people invited to the club are friends which share the same interests. i see it more as a learning community.

Any help or ideas is greatly appreciated, feel free to give advice knowing that I will nor act on it or hold anyone to it.

Regards

Finlay

Id just set it up as a company structure, issue one share to each member and open an ETrade, CommSec account.

No point in making it overly complicated unless you need to, others with more direct experience may have something different to say though

So_Cynical · 26 September 2010

The ASX site has some info on investment clubs.

http://www.asx.com.au/resources/education/investment_clubs/index.htm

Tysonboss1 · 26 September 2010

Re: advice with an investment club structures.

1q2w3e4r said:
Id just set it up as a company structure, issue one share to each member and open an ETrade, CommSec account.

No point in making it overly complicated unless you need to, others with more direct experience may have something different to say though

you would have to have a trust included in this structure with the company being trustee of the trust as this would allow the CGT discount to flow through to investors.

Or

a unit trust might be a better system so that investors can sell their shares in the unit trust to other members when they wish to leave, you can also just issue more share if some one wishes to join at a later date.

choice1 · 26 September 2010

I do this with a company structure personally.

One thing to consider is if you're investing (not trading) then using a trust structure or just having individual accounts may be better as you have access to the CGT discount.

Tysonboss1 · 26 September 2010

On a side note though, I can see alot of negatives to this sort of scheme, but I can not really see many positives.

Is Trading what you really want to do, why not just be an investor.

intense jono · 26 September 2010

A unit trust would be by far the best option.

Just to name a few of the advantages:

1. allows for CGT discount
2. ensures profits/capital gains are distributed fairly
3. easy for beneficiaries to sell units and for new beneficiaries to buy units at market value.
4. allows unit holders to maximise tax deduction in personal name if they are using loans to buy units in the trust.
5. use a company as trustee. Easy to add and remove directors. All unit holders can be a director of the trustee company. Therefore unit holders effectively have legal control over the way the trust distributes etc ..
6. means the unit holder has to worry about paying tax rather than the actual entity.

finlay · 26 September 2010

thank you all for your replies.

I should have been more concise, we are only planning to invest in Australian equities. ''Tysonboss1'' im interested to hear your negatives in regards to the scheme, please don’t take this the wrong way. Your ideas help me formulate mine and i really welcome your analysis. Thankyou in advance.

''intense jono'' would a unit trust be more expensive to construct? as you probably gather I’m a university student and have little margin. As i assume most people will not be taking out loans to buy in is it still worth the trust structure?

For simple terms, i was thinking that people bought a $500 share in the company or trust, which pays them dividends if the fund is in positive territory each year. If they decide to leave or withdraw their money, myself and the other partner get right at first refusal to buy them out at $500 is this sort of thing common practice?
The thought process behind this is that people receive the dividends on their investment in which the $500 gives them the earning power to do. So is it ok for us to set the buyout price at the price they bought in? Considering that is isn’t the greatest money making idea of all time it’s more targeted at a learning experience for all of us with a hint of reality.

Starting an investment club

finlay

1q2w3e4r

So_Cynical

The Contrarian Averager

Tysonboss1

choice1

Tysonboss1

intense jono

finlay

Similar threads

Starting an investment club

The Contrarian Averager

Similar threads

Privacy & Transparency

Privacy & Transparency