Forum Archive Index - March 2000

["Craig" <clindsay@ihug.co.nz>]

I started a Shareclub with 9 others just under 2 years ago and its going very well. I was advised to set it up as a partnership and registered the partnership with the IRD and opened a separate bank account where members contributions are deducted each month. We only raise a small amount each month and buy shares every second month.

 

The biggest problem with shareclubs is finding the right people with a long term commitment. It can get a little tricky if 12 months down the track, a member decides to pull out. You either have to sell shares to pay them out, find a new member to buy in at the value of the pay out or increase remaining members contributions to cover the amount. Obviously, the longer a shareclub runs, the more complicated it becomes if someone leaves. This is where its important to set out a list of conditions to be agreed and signed by each member.

 

I find that share clubs are an affordable way to have exposure to the market because although your own contribution may be small, the pooled funds of your members give you access to the market quicker than saving up lump sums yourself. You also set your own contribution amount and have no account management fees ( other than brokerage). I found a broker who was very helpful to our cause and after 17 months, our dividends and capital gain equate to over 30%. If the market isn't performing well, you aren't obliged to but shares and can accumulate funds at no cost until things improve. And most of all, it's fun because you're involved with decisions yourself.

 

I'm not sure if there's another way of setting up a shareclub other than a partnership but if you want more specifics on how I went about mine, let me know.

 

Good Luck

Craig