I had a question concerning starting an investment fund with some coworkers. We want to pool our money together and invest in multiple different stocks, but we don’t know what the legal implications of this would be. What would be the best structure for this fund and can we do it even if we do not have any certifications (we live in Canada). Ex: we would each put in 10K and invest 50% in sotckA, 30% in stockB and 20% in stockC. And then we would trade depending on returns and other opportunities… Thanks
Step 1: Pool the funds Step 2: Invest well Step 3: Add leverage to compound returns Step 4: Tell co-Workers you’re in the mob and take their money Step 5: Profit??
My advice is don’t. If you got 10k, invest it yourself. Investing with co-workers is about the quickest way to ruin your work relationship and possibly your career.
mtl_analyst Wrote: ------------------------------------------------------- > I had a question concerning starting an investment > fund with some coworkers. We want to pool our > money together and invest in multiple different > stocks, but we don’t know what the legal > implications of this would be. What would be the > best structure for this fund and can we do it even > if we do not have any certifications (we live in > Canada). > > Ex: we would each put in 10K and invest 50% in > sotckA, 30% in stockB and 20% in stockC. And then > we would trade depending on returns and other > opportunities… > > Thanks A senior investor. Count me in for another $10K too.
this type of deal is termed an ‘investment club’… i think there are big differences in regulations depending on if you receive consideration or not. http://www.sec.gov/investor/pubs/invclub.htm
you should definitely form some sort of entity (LLC or GP or something else) and have a documented partnership agreement spelling out who does what, how decisions are made, etc. You’ll inevitably run into disagreements on when to sell and stuff like that, so it’s obviously important to have rights/responsibilities spelled out beforehand. also you’ll have people who want to get out of the partnership before others, so you should spell out buyout procedures and stuff like that. if you keep it professional – and don’t rely on handshake agreements – i think it can be done with coworkers. i’m working on a putting together a real estate fund with former coworkers (who are also friends), so i can’t say from experience, but i think it’s doable. you should understand the tax implications of everything you do and get your employer’s approval!!
Thanks for the comments, Let’s say I still want to start an investment club (even though most of you seem to think its not a good idea…). Can anyone trade or do I need a certificate to be able to trade?
^i’m no expert but i think it might depend on if you’re managing 3rd party money. if it’s just the partner’s money i think you can do whatever you want. don’t know for sure though…
mtl_analyst Wrote: ------------------------------------------------------- > Thanks for the comments, > > Let’s say I still want to start an investment club > (even though most of you seem to think its not a > good idea…). Can anyone trade or do I need a > certificate to be able to trade? You will have to indicate it is a investment club on the application and those that are to have trading authority will have to be listed. If someone calls/logs in to trade on the account and doesn’t have the credentials they will be blocked.
I agree, don’t do it. you have very little to gain.
With that level of money you should just get together over coffee to discuss trades but then trade your own account. Seems like a lot of hastle as there is little benefit to co-mingling funds like that. Think admin, taxes, people wanting there money out etc.