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"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."


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 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

Good luck and best regards,


Founding Partner
Top 2 Investment Group
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