Member Contribution
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Member Contribution Laurie, We have a member who wants to make a sizable contribution to increase his holdings in our investment club. I'm aware it doesn't affect the value of other club members, and his contribution will buy "units" which will result in recalculation (downward) of each members percentage, while at the same time increasing the club's overall value. There are no Articles of Agreement restrictions for a member to do this, but no member has made such a sizable contribution since the club started (other than making the initial contribution as a new member). My only question is what thoughts do you have about this, or what guidelines you (or other clubs) might suggest to cover transactions such as this. The contribution reflects the members recognition of the club's success, and he hopes for future gains as he would if buying a good mutual fund, ETF, etc. Thanks for any thoughts you may have! Morgan Lamarche morganlamarche@comcast.net I say that is great as long as his ownership does not exceed 1/3 of the clubs value. If allowed to go higher it takes away from the very nature of the "club". I would address the issue in your bylaws.
Happy Investing Russ Ward On Wed, Aug 13, 2014 at 5:24 PM, Morgan Lamarche <morganlamarche@comcast.net> wrote: Laurie, We had strict rules for many years about this, and it never benefited or hurt the club. In our later years, we relaxed our criteria and let people contribute what they wanted. With a one-member-one-vote rule well enforced, there's never been an issue. Lynn Ostrem, Minneapolis Our bylaws say that members can contribute (in $25 increments for ease of bookkeeping) up to the maximum held by any other member. During times of such market volatility one should consider dollar cost averaging of large contributions, rather than dropping them in all at one time. Jeanne Tieken, South Shore Seniors, Indiana On Wed, Aug 13, 2014 at 4:39 PM, Lynn Ostrem <garbagecop@gmail.com> wrote:
There is no accounting reason this is a problem. Other members might own a smaller percentage of the club, but you will have more assets to invest and earn money on. So, in theory they could end up earning the same total dollars as they had before. It's mostly a question of whether your decision making process will change. I think most clubs let each members vote count equally in decisions. If you have votes that are weighted by ownership share, this persons opinion would decide everything. You just need to make sure you agree on how you're going to make decisions if this persons share is so out of proportion to everyone elses.If you feel there is a problem with him owning such a large percentage, he could easily mirror the clubs activities in his own account. He doesn't have to invest it all in the club to take advantage of your decisions. Laurie Frederiksen
Invest with your friends! www.bivio.com Become our Facebook friend! www.facebook.com/bivio Follow us on twitter! www.twitter.com/bivio Follow Us on Google+ Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe I agree with Laurie and Lynn. I see a problem if votes are made by units or a percentage basis. Many clubs are, and this would give undue weight to that person's vote. But, the clubs to which I've belonged have a one member - one vote system. So, to me, how your club handles voting determines whether there would be a problem. (Also, how much is this person wanting to add? It might be a a small amount [but a lot in relation to
other members], so that is why the money is going into the club. But, we learn so we can invest on our own, so putting the money into a private account might make more sense, especially if it truly is a lot of money.) Roy Chastain
"We make a living by what we get, we make a life by what we give." (Ronald Reagan, 8/8/1992) From: Laurie Frederiksen <laurie@bivio.biz> To: The Club Cafe <club_cafe@bivio.com> Sent: Wednesday, August 13, 2014 3:57 PM Subject: Re: [club_cafe] Member Contribution There is no accounting reason this is a problem. Other members might own a smaller percentage of the club, but you will have more assets to invest and earn money on. So, in theory they could end up
earning the same total dollars as they had before. It's mostly a question of whether your decision making process will change. I think most clubs let each members vote count equally in decisions. If you have votes that are weighted by ownership share, this persons opinion would decide everything. You just need to make sure you agree on how you're going to make decisions if this persons share is so out of proportion to everyone elses.If you feel there is a problem with him owning such a large percentage, he could easily mirror the clubs activities in his own account. He doesn't have to invest it all in the club to take advantage of your decisions. Laurie Frederiksen Invest with your friends! www.bivio.com Become our Facebook friend! www.facebook.com/bivio Follow us on twitter! www.twitter.com/bivio Follow Us on Google+ Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe I remember a college professor said "if you forget everything about this class, just remember power and politics are always with us." That is the scope of your issue. With one vote per member you avoid some issues. But if this is truly a large sum for the club, you might suggest the member build a mirror of the club portfolio at his own broker. Then when something goes bump in the night, the member remains in control of his own destiny and everyone can sleep. Otherwise, the frustrations of a member screaming “I’m losing everything” will have to be dealt with, quickly. Large sums are not bad per se, but they change the dynamics and interactions of members that should be friends. Keep it simple and keep it friendly for the club and its portfolio. Mark Eckman -----Original Message----- Laurie, We have a member who wants to make a sizable contribution to increase his holdings in our investment club. I'm aware it doesn't affect the value of other club members, and his contribution will buy "units" which will result in recalculation (downward) of each members percentage, while at the same time increasing the club's overall value. There are no Articles of Agreement restrictions for a member to do this, but no member has made such a sizable contribution since the club started (other than making the initial contribution as a new member). My only question is what thoughts do you have about this, or what guidelines you (or other clubs) might suggest to cover transactions such as this. The contribution reflects the members recognition of the club's success, and he hopes for future gains as he would if buying a good mutual fund, ETF, etc. Thanks for any thoughts you may have! Morgan Lamarche My club adopted the suggested rule that no partner could own more than 200 / (# of partners) of the club. That worked until three long-time members withdrew leaving only one old-timer, one mid-timer, and one newbie. Needless to say we bumped up against that limit with one partner holding 57%, one 38% and the last 5%. Since we still observe the
one person-one vote rule and the majority holder is me, no issues have cropped up as yet. Adding more members would probably head this off before it becomes an issue but we have found that those persons who want to join are not the same 'want to learn how to invest' people we would like to find. Mike Jones Wall$treet Wannabees Bloomington, MN From: Morgan Lamarche <morganlamarche@comcast.net> To: Laurie Frederiksen <club_cafe@bivio.com> Sent: Wednesday, August 13, 2014 4:24 PM Subject: [club_cafe] Member Contribution Laurie, We have a member who wants to make a sizable contribution to increase his holdings in our investment club. I'm aware it doesn't affect the value of other club members, and his contribution will buy "units" which will result in recalculation (downward) of each members percentage, while at the same time increasing the club's overall value. There are no Articles of Agreement restrictions for a member to do this, but no member has made such a sizable contribution since the club started (other than making the initial contribution as a new member). My only question is what thoughts do you have about this, or what guidelines you (or other clubs) might suggest to cover transactions such as this. The contribution reflects the members recognition of the club's success, and he hopes for future gains as he would if buying a good mutual fund, ETF, etc. Thanks for any thoughts you may have! Morgan Lamarche morganlamarche@comcast.net Mike, it's my opinion that the rule is only important in clubs with ownership percent voting. Opinions may vary and the club should use what works for its partners. Sent from my iPhone
Mike, Where's the problem? With 3 members, your largest member could own 66.6% at 200/x. Ira Smilovitz
On Thu, Aug 14, 2014 at 10:34 AM, Mike Jones via bivio.com <user*21595500001@bivio.com> wrote:
Until the mid-timer invested a chunk of cash, that was exactly the problem. I was trying to emphasize that even well-thought out rules can have unexpected results. If you allow proportional voting, this imbalance may become an issue. If you enforce one-person/one-vote and the majority partner disagrees with the results, that may become an issue. Even though we believed that we had thought of everything, it is easier to modify our Partnership Agreement when we find that something doesn't work as expected. Mike Jones Wall$treet Wannabees From: ira smilovitz <ira.smilovitz@gmail.com> To: "club_cafe@bivio.com" <club_cafe@bivio.com> Sent: Thursday, August 14, 2014 12:09 PM Subject: Re: [club_cafe] Member Contribution Mike, Where's the problem? With 3 members, your largest member could own 66.6% at 200/x. Ira Smilovitz
On Thu, Aug 14, 2014 at 10:34 AM, Mike Jones via bivio.com <user*21595500001@bivio.com> wrote:
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