UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev | Next
Author: Spyneyes Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 7258  
Subject: Re: Units Date: 7/16/2001 9:03 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 6
"Some of our members are having a diificult time with the fact that we have been in the negative for 18 months and to think that a new member could join and be positive the first month after we struggled for a long time. Does this all make sense or am I out of the ozone."

Ron,

I hope you don't mind me jumping in here. But you and your club partners need to face reality and if you don't understand the basic concepts of investing, as you've just questioned, you shouldn't be organized together as investors. That's the hard core reality. However, there is still hope for your endeavor.

Your club should work no differently than a mutual fund. The share value fluctuates from day to day, or in the case of your club, usually just month to month, when a monthly valuation is calculated. Individual performance results, just like a mutual fund, will depend on timing and how much was invested at any given time. Newcomers could certainly have better performance right of of the chute vs. older club partners.

Your club needs to give very serious and immediate consideration to getting your accounting in order. I would strongly suggest you check out www.Bivio.com at the very least and get your books in order.

Call me crazy, but I wouldn't even consider joining a club without proper accounting procedures in place with partners understanding how the system works. It's not that complicated.

On another note, you seemed to have discovered that trying to keep everyone equal just doesn't work out in the long-term. The whole concept is ripe for problems, as you're apparently beginning to realize.

There are individuals and clubs that feel otherwise, but our group sees absolutely no reason to expect partners to be "equal" in the number of shares owned.

It creates all sorts of problems in bringing in new members, especially as your portfolio grows. In addition it doesn't allow for partial withdrawals down the road should members want to cash out some of their holdings. Why would you want to restrict all these reasonable expectations as an investment club partner in the name of "equality?"

Our groups current member share ranges from 5.9% to as much as 15.1% of our portfolio. In addition we vote our shares on most issues (vs. 1 vote per member), and to date the system has worked well for us, believing that those with the most funds committed deserve a greater voice in the partnerships affairs.

The NAIC book, "Starting and Running a Profitable Investment Club" addresses this subject.

"An investment club is a business and, like other businesses, seems to function best when decision-making power relates to risk capital employed."

In my opinion (again) you'd be wise to keep this advice in mind in everything that you do as a club.

For more on this subject see the following links:

Equal Partners and Why That Doesn't Work - by Herb Barnett
http://www.better-investing.org/clubs/equal-partners.html

http://www.better-investing.org/clubs/jerrys-best.html

http://boards.fool.com/Message.asp?id=1030017001136000&sort=id

Good luck and best regards,


Rick

Founding Partner
Top 2 Investment Group
www.Top2InvestmentGroup.com
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev | Next

Announcements

Starting a Club
Learn how to start and run your own club, the Motley Fool way!
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Macro Economics

Implications of the Ballad of Ted Plotz
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement