Why is your club buying very expensive stock?  You are
missing out on plenty of good companies that are much
cheaper.  My club started with 7 members and about $225 a
month to invest.  We didn't buy expensive stocks, our
typical stock was around $10-20 each.  We were very happy
doing that.  You can save up three months and have $360 to
invest.  I believe that your members will be happier
investing more often.  And your money isn't sitting around
in a savings account hardly making any interest while you
save up for a expensive stock.  Actually, our more expensive
stocks have not been our best performers.

John




Ellen Shershow wrote:

Jack,Thank you so much for this very detailed answer.One more question:Because we are a new club (about a year and half old) our portfolio is quite small. In fact, the full amount per person remains at just under $500.Part of why the new members 'buying out' the exiting members was appealing to us is that, were we to pay them in cash (and we say cash in our agreement--this was clearly a naive mistake on our part which I will suggest we amend, but for now it is what it is) we would have to pay the two of them a combined amount of just under $1,000. With 6 people and monthly dues of only $20 it would take us some time to build up enough cash to purchase stock again. Rip West sent me a link to this article:Jim Taylor's document, starting at page 10.http://www.bivio.com/pugetsoundbi/files/ClubAccounting/Club%20Accounting%20Concepts.pdf at the very end, Mr. Taylor states:"From a practical point of view, especially when the value of a full withdrawal is relatively small

, it's certainly less complicated to pay a full withdrawal in cash. If a club decides to sell securities to raise the necessary cash, it's generally best to sell securities held at a loss.Would under $500 be considered quite small?I suppose there is some psychology at work here; we are all new at investing and none of us can afford more than $20 per month, the first year of our club was frustrating as we could never afford to purchase much of anything. We felt that we had finally built up enough cash to do such, but would not be able to if we lose all our cash to the exiting members--hence the new members offering to 'buy in' sounded perfect.I appreciate any advice!Ellen Ellen Shershow Pena Photographywww.ellenswebsite.comwww.ellenswebsite.com/category/blog/415.690.0278

On Jan 17, 2011, at 11:03 AM, John W Ranby wrote:Ellen:Please allow me to divide your questions into severalsubparts.First the mention of Apple stock. The reference infers thatyour club has accrued capital gains in the stock based onthe investment of cash supplied by all the members. Yourdesire to complete the withdrawal of members because theymight further profit from their investment in the club ismisplaced. As long as their investment in the club is atrisk, they are entitled to share in the gain as well as theloss (at the time of my writing this answer, Apple is downon the European markets based on the news that Steve Jobs istaking a leave of absence). Once the withdrawing member'sunits are valued for purposes of withdrawal in accordancewith the partnership terms, then common courtesy requiresthat you transfer their assets back to them.You need to follow the timeline spelled out in yourpartnership agreement to complete the withdrawals.Second, regarding your question abou

t tax implications. Ifyou choose to sell stock that has a gain to pay off thewithdrawing members, the remaining members will incurcaptial gains earlier than they need to. To minimize the taximplications, the normal recommedation is to transfer sharesof stock having a gain to the withdrawing members, and sellstock having a loss if necessary to raise cash to completethe withdrawal.Third, the amount the new members have to pay to join shouldhave no relationship to the amount due to the withdrawingmembers. These are two separate events. Each event couldoccur in the absence the other.Your partnership agreement should provide what is theminimum buy-in required of new members. In the case of myclub, it is $500. Remember, it is unnecessary (and extremelydifficult to maintain) to have every member have the samenumber of units. In the case of my club, none of the tenmembers has exactly the same number of units. And thedifference between the member with the most units and themember wit
h the least is significant. It does not mattter,bivio software can handle it.Each of these topics have been discussed in great detailpreviously. I am sure if you search bivio website, you willfind further discussion of each of them.Jack Ranby, TreasurerGrants Partners Investment ClubEllen Shershow wrote:Hello,I'm sure this has been asked before, but I'm not sure where to find the answer:Two of our 6 members want to withdraw, and two new people want to buy them out and enter the club. As the accountant, I'm curious  how to do this/tax implications/anything else we might need to know?As an additional FYI, we have some apple stock, and we would like to make this switch ASAP, as we don't want our withdrawing members to profit after having given notice and --more importantly--the new members have given us the top amount they can afford to buy in at and it is very close to what our exiting members shares are now. We are nervous that if we wait apple will shoot up and the
new members wont be able to afford to join.EllenEllen Shershow Pena Photographywww.ellenswebsite.comwww.ellenswebsite.com/category/blog/415.690.0278