Setting up a Share Club

richiebrooke

Hi,

It seems there are 2 x popular ways in order to proceed into setting up an Investment Club with a group of friends; a recognised Shareclub such as Proshare or an Limited company.

The aim is not a high risk 'Get rich Quick' scheme but more of a low regular monthly contribution from all parties to create a slow burning fun / social way of investing with a group of peers to share ideas and (hopefully make some profit along the way.

I'd liker to hear what would be the 'best' route to take from an administrative and tax efficiency (accountancy) point of view what is the 'best' scheme to run and what is the most tax efficient?

Anything else you can chip in all the better.

Thanks

Denzel09uk

Im also in the process of setting up an investment club, ive seen share.com which looks extremely helpful, but they have said i need a bank account. but none of the banks want to talk to me about it.
What success have you had with banks?

bowlhead99

I got the standard documents for the proshare share club many years ago though we never got round to doing it.

Effectively the most tax efficient route is a tax transparent partnership with each member taxed on their share of the joint activities: which is, iirc, what you would have by following the proshare method.

You don't want to stick a company in there and have the company pay corporation tax on its profits when all the individual "club members" have their own personal tax situations and annual capital gains exemptions and interest and dividends tax allowances.

EdGasket

Seems a waste of time and costly. Just invest yourself. If you want to spread risk, just buy a global fund; job done.

Also if prices move fast you will miss out because you'll have to get all the other members to agree to buy or sell before you can execute a trade.

What advantages do you see of a 'Share Club'?

grey_gym_sock

EdGasket wrote: »

Seems a waste of time and costly. Just invest yourself. If you want to spread risk, just buy a global fund; job done.

i agree. if the aim is to make a bit money, you're probably better off setting up a simple portfolio for yourself.

there may be social benefits from a 'share club'. but ask yourself: would you still do it if you knew you'd make less money by investing via a club than individually? there are other kinds of clubs you could set up.

Rollinghome

As said by others, making investing a social activity is a nice idea but, from my limited experience, works less well in practice. Investment clubs probably don't make much sense for real investment. Boring investments tend to get the best results.

A problem I found with a long established investment club was that the majority of people attracted to it had limited previous experience of investment. I guess that was the reason they joined a club.

The result was that the blind were leading the blind organised as a committee. As seems to be the norm, the club met just once a month, rather than when events made it the time to make changes; decisions were made in a minutes on a show of hands with little information and usually on the basis of what someone had read in some newspaper or Investor's Chronicle so they were always trailing events. Everyone was very keen to buy and sell things because that's more fun: so generating large trading costs. When responsibility is shared then no one is responsible.

Most clubs seem to revolve around just share trading, almost exclusively UK shares, rather than diversified investment - though I'm sure there must be a few clubs with reasonable expertise. For the rest, they'd be useful if they taught new investors how to invest but they're just as likely to teach bad habits. So it's not how I'd choose to invest real money and as such can be just a distraction with every chance of returns being well behind a simple tracker - which may not be a problem if the priority is for a couple of beers.

I suspect a club where like-minded people could just discuss and swap investment ideas rather than share-trading by committee might be more useful - which is a bit like the way this board works.

Denzel09uk wrote: »

Im also in the process of setting up an investment club, ive seen share.com which looks extremely helpful, but they have said i need a bank account. but none of the banks want to talk to me about it.
What success have you had with banks?

The bank they used was Lloyds.

Mr_Costcutter

Many years ago I was a member of an investment club and found it to be a very positive experience. The founder was a retired accountant and his knowledge of the world of investment was a real bonus. Personally, it acted as a stepping stone for me and enabled me to gain the confidence/knowledge to make investment decisions on my own.

jimjames

I agree with the posts above highlighting the issues. Would it not make more sense to have a club where you meet monthly and discuss the investments you have made personally and how they are doing? Then means you have no worries about shared money and can invest amounts suitable for your situation.


Otherwise I assume it will only be small amounts contributed as an experiment and not your whole portfolio managed in this way so won't have a significant impact on your wealth other than as learning.

richiebrooke

Lots of good input here with for me to consider what I really want.

Thanks a lot for all your assistance