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Advice - Investment Clubs
| There are more than 3,500 investment clubs around the
country and more than 100 open each month as people from all walks
of life find out that investing is an absorbing hobby as well as a
potential way of making money. |
| Clubs meet once a month for a couple of hours to discuss
how to play the stock market. The nominated treasurer or chairman
may spend another hour or two a month extra. The group's members -
by law there can be no more than 20 - may be family, work colleagues
or simply friends. They do not have to be investment experts, simply
people interested in trying to make money through buying and selling
shares. You can discuss your progress and compare against others on
our Bulletin Boards. |
The group's members - by
law there can be no more than 20 - may be family, work colleagues
or simply friends
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Typical subscription is
between £25- £30 but it be as low as £10
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Members decide on a monthly subscription to raise
cash to buy shares. With some clubs it is as low as £10 per member,
but more typically the subscription is around £25-£30. The only
other expense is the broker charges for selling. It is important
to keep your broker charges low by using a low-cost internet broker
like those in our low-cost brokers
table. |
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It is often easier to start up your own club with friends who share
your attitudes towards stock market investing that it is to join
an existing club - most are either full or wary of inviting strangers
to join them. If you want to start a club use our step-by-step
guide to get started.
Once you have a group of interested people together, you need to
name your club and nominate a chair, a treasurer who looks after
buying and selling the shares and a secretary who keeps records
of the minutes. You then need to fix the monthly subscription and
discuss the investment policy.
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| Your club also needs a constitution, the
rules of which every member agrees upon and signs. Often banks or
building societies want to see your constitution before they will
open an account for you. The club needs an account to deposit money,
receive dividends and meet any running costs. You can have an account
in the name of the club, but you need to nominate two or three people
(usually the treasurer and another person) who can write cheques on
behalf of the club. Members then set up a standing order to pay their
monthly subscriptions into this account. |
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Clubs must ensure that they
do not give 'advice on investments' to outsiders, as this is against
the law.
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Deciding what to buy depends on your club's ideas.
Investment clubs are democratic - each investment decision is taken
by a majority vote. Are you cautious investors, willing to be the
tortoise rather than the hare? Or do you prefer to buy and sell frequently,
taking a more short-term view? These are key issues that you need
to work out. Either way the information on this site is your invaluable
starting point for investment decisions. |
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You buy the shares through an execution only stockbroker, who buys
and sells shares for the club (see our low-cost
brokers table for the best ones to use). He does not give advice
on specific shares.
A share certificate cannot be in the name of a partnership and,
technically, investment clubs are partnerships. So shares are held
through a nominee company which is operated by a stockbroker which
allows its name to be used for the registration of shares. A formal
agreement is drawn up between the broker and the club, and two members
of the club act on its behalf. Doing this helps speed things up
as well as keeping costs and administration down. Providing your
club conforms to all the requirements of its stockbroker agreement,
there will be excellent safeguards in place to prevent a member
retiring to the Bahamas with the funds.
If you're going to keep on the good side of Her Majesty's treasury
you should tell the Inland Revenue when you form an investment club,
as with any source of income. At the end of the tax year the club's
treasurer distributes the club's gains and income equally among
the members. You qualify for something called a Simplified Scheme
if subscriptions are not more than £1,000 a year, membership is
not more than 20 people and the total net gains of the club are
not more than £5,000. You need to get form 185-1 from your local
tax office and every member should fill one in.
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The rules for leaving the club are in your constitution, but usually
you will have to give three months' notice before you can withdraw
your money. The amount you get is calculated by multiplying the
number of stocks being sold by the current value, deducting brokerage
fees and adding any surplus cash to his/her credit.
To start your club now go to the step-by-step
guide . Make a regular income and have fun building your portfolio
of shares.
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