Hello all,

My friends and family constantly ask me for investment
advice and stock tips. The investments I have made for them
have done allright. So they keep coming back for more =)

I dont mind helping but I was looking for a way to manage
all their investments easier.

So I thought of an approach where I'd start an investment
club and have them pool their money in. However, in the
partnership papers it would state that only I would be
allowed to make investment decisions regarding the clubs
portfolio. So in effect I will have created a mutual fund of
sorts where they can invest in.

They are also ok with me drawing an annual fee for my
assistance.

My question to you all is -
a) Is this legal ? I assume so since all my paperwork will
clearly state my credentials and risks with investingi n
general.
b) How do I withdraw the annual fee ? For example if I have
to sell shares to get the cash needed to take the fee, then
should the taxes involved with that transaction be a burden
of the investors ? How would it impact the club finances ?
c) Are there any other things I havent considered with my
poor mans "mutual fund" idea ?

Thanks for your advice and feedback,
Shawn

Shawn, the thing you haven't considered with this idea is it is a very bad
risk for the others. My son got into something like that with some friends
who pooled money to give someone they trusted to invest for them, and they
lost every bit! While I am sure your intentions are entirely honorable, it
would be a far better idea to create a real investment club, where all of
you can learn to analyze companies for purchase based on fundamental stock
studies. Also, all of you should be involved in the decision making. And,
I can't help but think you are flirting with SEC regulations to set it up
where you make all the decisions, and especially if you are going to take an
annual fee for doing this. There will always be some overhead with the
club, but standard investment clubs prohibit compensation.

Gene Rooks, Orlando

> a) Is this legal ?

No! Not if you don't have a Series 7 license and approval from the SEC.

> I assume so since all my paperwork will clearly state my credentials...

What credentials? See above.

> c) Are there any other things I havent considered with my
> poor mans "mutual fund" idea?

Yes, the penalties and jail time you could get if you lose their money and
they turn you in. And don't think this can't happen! Family and friends
can turn on us faster than strangers when their noses get out of joint!

The point is, Shawn, your heart is in the right place. If you are naturally
good at choosing stocks, you should consider pursuing it as a career. It's
certainly fun to share those ideas with others, especially when they pan
out. But you really need to do it right.

If this is for YOU...get your license. Be legal. If it's for THEM...teach
a man to fish.

Lynn Ostrem, Vice President and Education Chair
Crow River Investment Club
garbagecop@gmail.com
www.bivio.com/crowriver