Who are ProShare Investment Clubs?
ProShare Investment Clubs is an organisation, partnered with Digital Look Ltd, that works to promote investment clubs and provide support to help clubs become better investors.
How much do members pay into investment clubs?
The monthly subscription can vary from as little as £10 to as much as £100 or more, but the most common subscription level is between £25 and £30. Some clubs begin with an initial lump sum payment by members, which enables the club to make investments straight away rather than having to wait until the monthly subscriptions have built up over time. Remember that the lower the subscription level, the less frequently the club will be in a position to make investments.For example, if a club has 20 members who subscribe a standard £10 per month, it will only be feasible to invest every 2-3 months (as investments should be made in 'chunks' of no less than £500 because of broker's minimum commission charges). However, the time in between making investments can be spent carefully researching shares and perhaps even running a fantasy portfolio!
Q. Can I join a club in my area?
A. Unfortunately, we are not able to pass on the names of investment clubs due to The Data Protection Act. The vast majority of clubs insist on preserving their anonymity. This is because their membership usually comprises friends, relatives and colleagues - people who have already known each other for some time.
They are sometimes wary about introducing strangers into their groups, particularly as money is involved. It might be possible to enter an existing group where you know someone who is already in that club and they can introduce you to the group and vouch for you.
However, we can help you to get in touch with clubs in your area. Send an email including your name, age, city and county to firstname.lastname@example.org and we'll make a posting on our Club Bulletin Board on your behalf.
The very best way of becoming involved in the movement is to start a club of your own. While this may seem fairly daunting at first, we emphasise that this is not, repeat not, a difficult process.
ProShare produces an Investment Club Manual, which covers every conceivable aspect of starting and running a club. It makes the whole process as easy as possible and there’s a ProShare Helpline to assist with any teething troubles.
More on the Manual
Q. Do I know enough people?
A. You only need a handful of people to form a club. As few as five will be plenty and you can sure be that once the club gets off the ground interest will grow and you will soon be turning people away. Do not feel that you have to do all of the recruitment work yourself. Ask a couple of interested friends to recruit their friends and acquaintances and make your job a little easier.
Q. Do we need to recruit an expert?
A. Many clubs run without ‘expert’ members. Buying and selling shares is fairly straightforward. The ProShare Investor Update series is a series of fact sheets on all different aspects of investment that a new club will find useful. Most stockbrokers will be delighted to help you at the outset and at least ten major brokers have special departments and dealing services for investment clubs.
ProShare has developed The Investors Toolkit to help all investors and especially novices make informed investment decisions. This unique system allows private investors and clubs, however inexperienced, to use their own skills to accurately assess the track record of a company and its management, and decide whether its share price today represents good value for money.
The Investors Toolkit consists of a guide to analysing shares, Share Appraisal Forms, The Investor’s Guide to Information Sources, a sample copy of CD REFS and a full set of ProShare investor updates. More on the Toolkit
Although your members might not have direct stock market experience, the strength of an investment club lies in the fact that members will have a variety of expertise from their job and other interests and this enables them to make recommendations based on experience - for which there is no substitute.
Q. Is there much administration?
A. No. It really isn’t too complicated, particularly when you follow The ProShare Manual. You can always call our Helpline with any queries. Formalities at meetings should be kept to a minimum and most of the time at meetings should be spent discussing the merits of particular shares. Duties can be shared amongst club personnel with the key jobs of secretary and treasurer taking no more than an hour a month.
Some clubs even have deputies for the roles of Treasurer, Chairman and Secretary so that duties can be split up even further. The beauty of an investment club is that the job of investigating particular shares or sectors can be divided between members, with each member responsible for a particular piece of research which can be reported back at meetings. The workload will not fall on your shoulders alone!
Q. How much time will it take?
A. The ProShare Manual outlines a paper-based ‘unit valuation’ system for keeping your accounts in order and if you follow it you should not need to spend more than a couple of hours a month on it. If you have access to a PC, an easy-to-use program has been devised specially for investment clubs by ICLUB central Inc, who can be contacted for further information.
Q. How much does it cost?
A. The monthly subscription can vary from as little as £10 to as much as £100 or more, but the most common subscription level is between £25 and £30. Some clubs begin with an initial lump sum payment by members, which enables the club to make investments straight away rather than having to wait until the monthly subscriptions have built up over time. Remember that the lower the subscription level, the less frequently the club will be able to make investments.
For example, if a club has 20 members who subscribe a standard £10 per month, it will only be feasible to invest every 2-3 months (as investments should be made in ‘chunks’ of no less than £500 because of broker’s minimum commission charges). However, the time in between making investments can be spent carefully researching shares and perhaps even running a fantasy portfolio!
Q. Are there any tax advantages?
A. Whilst there are many other advantages to investing through an investment club such as shared knowledge and costs - there are no tax benefits given to members of an investment club.
Members are taxed individually and everyone in the club is liable to pay tax on their share of the club’s profits, both income tax on dividends and capital gains tax on any increase in price of shares sold.
Full details and even sample forms are contained in The ProShare Investment Club Manual or from your local tax office. See our Investor Update on Tax also.
Q. Can I use a club to save for my children or nieces/nephews?
A. You can certainly earmark your club investments for your children’s future, as all club investments should be made with a long-term perspective in mind. You cannot, however, hold investments in the name of a minor, as they are not able to buy and sell shares until they are 18.
There are no tax advantages to holding investments in a child’s name as if the money invested for a child has come from the parent, any income that it generates over £100 per annum, will be liable for capital gains and/or income tax at the adult’s normal rate. See our Investor Update on Children
Q. Can I charge my club for my financial knowledge?
A. No member can be paid for their services to the club. The Financial Services Act 1986 covers many areas of investment business and there are severe penalties for breaching the rules and regulations of the Act.
It is a requirement of the Act that anyone carrying out investment business must be authorised – and this involves a great deal of time and effort and taking specific exams. Ordinary investors, such as members of investment clubs, are exempt provided that they act only on their own or the club’s behalf and are not paid for their services. Agreed expenses for stationery, postage etc. is OK – anything else is illegal!
You should look at the investment club as a way of sharing your knowledge with friends, not profiting from them. You will be surprised how much you learn from participating in a club. Even the most inexperienced members in the club will have experience from work, hobbies or life in general that will give them an expertise in a particular companies and sectors that you know nothing about!
Q. Is it not better to put my savings into a bank account?
A. Over any 10 year period, investment in company shares is proven to be a most lucrative form of investment provided it is done with care and knowledge. ProShare does not encourage people to put all their savings into the stock market. As a rough guide we suggest that the money an individual decides to invest in shares should be cash he does not want to use for at least five years. In this way the variations in the market should, over time, even out.
Clubs, like individuals, should aim for a varied and balanced portfolio to protect against fluctuations in particular sectors.