We are interested in adding a new member or two to our club.
We decided early on that we wanted to keep equal percentage
ownership in our club for all members so that we won't run
into issues where somebody with a higher percentage
ownership dominates the investment decisions.

How can we add one or two members so that they are equal
percentage owners as the rest of us?

Your help is greatly appreciated!!

Robby Moss
Who Dat Investment Club

Home of the Saints and Super Bowl XXXVI!

Hartwig Moss IV writes:
> We are interested in adding a new member or two to our club.
> We decided early on that we wanted to keep equal percentage
> ownership in our club for all members so that we won't run
> into issues where somebody with a higher percentage
> ownership dominates the investment decisions.

Your question is answered below. I would like to address the issue of
"equal percentage ownership" first however.

In our experience, investment clubs work best when operated like a
mutual fund. In a mutual fund, investors can come and go as they
please. The computerized accounting system takes care of the math.
There are no late fees, advance payments, DRPs, or attempts to keep
the pooled assets equal.

An investment club is a social group. In any social group, people are
free to come and go. There is a certain cohesion to the group which
keeps the core consistent. If the core is not consistent, the group
disbands. Usually, the group holds together, because the bonds are
strong.

bivio's charter is to eliminate the one weak point in an investment
club: the job of treasurer. We help many clubs maintain their books
almost automatically. The key has been to simplify the procedures of
the club, such as, eliminating DRPs, fees, fixed valuation dates, bank
accounts, and equal percentages equal. We add in penny payments and
AccountSync to make the club accounting 90% automatic. The other 10%
is trivial.

An investment club is about investing, not accounting. You shouldn't
need to understand how the unit value system works in intricate
detail. Club accounting should be as easy as balancing your
checkbook. Just go down the list transactions, and make sure they
agree between your checkbook and the bank statement. How many people
understand and verify that the interest paid by the bank is what they
are due? You just assume it is right as long it is reasonable.

Is there a danger that someone would takeover your club? I don't
think so. The percentages will remain roughly the same. If a member
starts getting too large of a percentage, the club might suggest that
the member withdraw some cash or stock to keep the values in balance.
It shouldn't be a big deal to ask member to do this. If it is, the
social group lacks cohesion and probably has difficulty agreeing on
investment decisions. We have found that successful clubs operate on
the principle of "do what is reasonable".

Now on to the mechanics of your question...

> How can we add one or two members so that they are equal
> percentage owners as the rest of us?

This is very easy. Pick a valuation date. Produce a member summary
report on the date. Have the new members pay the market value of an
existing member. Record the payment transaction using this same
valuation and transaction dduringate.

Please note the members will not have the same Paid In amounts, but
their percentages will be the same.

Cheers,
Rob
during