Wealth through conventional investment principles

Portfolio structure

Composition of club’s investment portfolio

The club is simply a group of persons who decided to work together to accumulate capital with a view to invest it in sound ways that will increase their wealth over the long term.

The money will be paid into one account and the money (investment) of each member is therefore subjected to the same / identical investment risk. This website is all about long term investing in the Johannesburg Stock Exchange (JSE) and will concern itself therefore only with share investment accounts.

Persons (club members) pool their financial resources in a share investment account to acquire capital for the purpose of buying shares of companies listed on the JSE. The assets of the club will therefore at any point in time consist of a combination of shares (shares bought with the available cash) plus cash in the account (un-invested cash / cash not yet used to buy shares). The value of the investment will be determined by the price of the shares (owned / held by the club) at any particular point in time, interest earned on the un-invested cash in the account plus dividends received from shares the club is invested in.

The structure of the club’s investment portfolio (joint fund) therefore closely resembles that of a collective investment scheme (previously referred to as a “unit trust”). The investment of each club member is subject to the same market risk and daily fluctuation in the prices of shares trading on the JSE.

The stake (portion the investment) of each member is determined by their individual investments in the club.

All gains (share price appreciation, interest on un-invested cash and dividends earned) area distributed proportionally to members in accordance with their individual shareholding in the club.

All cost e.g. monthly cost of the financial institution to operate the investment account, is also distributed proportionally in the same way as the financial gains.

 

Allocation of taxable amounts

It is important to note that the club / partnership is not liable for tax and is not required to submit financial statements to SARS on a yearly basis. The liability for tax is however passed on the members of a club / partnership is their personal capacity as individual tax payers.

All taxable amounts (capital gains / losses, dividends, interest on un-invested cash and income) will for this reason have to be allocated to members proportionally in accordance with their shareholding in the club.