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What are Investment Clubs
4/24/2020 10:35:03 AM

What are Investment Clubs? 

They are simply a group of people who come together with the aim of investing or trading.  The club can be social based; educational based or both and have a specific reason to invest.  Each month the members of the group pay a set amount into the club and each month a decision is taken by the members about what they should invest in.

A group of doctors decided to set up a Share investment Club.  There were initially 8 members which later became 10 members.  The club started in 1994.  The doctors all had interests in different areas so each person was responsible for researching shares in the designated area and presenting their findings to the group each month.  Collectively the group started with members contributing a small amount equivalent of around £100 per month.  Today the investment club has funds equivalent to £725,000.  For the past 4 years nobody has contributed to the club they just reinvest the funds.  The calculation on this is 10 people have invested £100 each per month which equals £12,000 per year multiplied by 22 years equals £264,000 total contribution and £461,000 profit.


Investment Clubs operate throughout the world and can be used for specific investment strategies such as Trading; Share Investing; Property Investing and Bullion Investing.


How Investment Clubs Work

Clubs are set up to run as a separate entity through companies; trusts or partnerships.  They have their own bank accounts and everyone within the club is responsible for the running of the club, the research and the decision on the investment.  For example, a club would have a treasurer; a secretary to record the minutes of the meeting; a chairperson who controls the meetings and has the final say if there is a deadlock in the voting; a designated investor who will place the investments and you would need back ups to the roles.  The entity needs a set of rules to run by with decisions on how to exit a club if a member wants to leave; the timeframe you want the club to run; adding new members etc.


Benefits of Investment Clubs

·         Pooled resources – with everyone contributing to the club the research is spread amongst members which allows more research to be done than one individual could

·         Pooled Money – with larger sums of money to invest the trading costs are reduced allowing higher returns than if you were investing as an individual.  You can access investments that may be more expensive but offering greater returns

·         Risk Reduction – with majority rules the decision making carries less risk as you are all contributing to a decision rather than making it individually

·         Tax – a SAPP can be set up with a company structure to reduce tax and provide future pensions (depending on club rules)

·         Trust – clubs can be set up with people you already know and trust

·         Social – clubs can be social so you get out and meet people


Investment Club Opportunities

There are currently some opportunities to join investment clubs through the £2.73 Club they are:

1.       Trading Club  – for clients interested in Trading on overseas markets.  This club is educational and practical


2.       Business Investment Club – this club has opportunities to buy into other businesses providing long term residual investment opportunities


3.       Bullion Investment Club – for club is for investing in Gold & Silver Bullion through offshore, tax free, income generating opportunities


 If you are interested in joining an Investment Club contact me

All Money is Loaned into Existence
4/6/2020 3:44:10 PM

All Money is Loaned into Existence

While you and I work to generate the cash we need to cover all our everyday bills, have you ever thought about where the money comes from? 

It is all loaned into existence.

My specialist area is money flow.  What that means is I look at where money is moved from an investment and where it is being reinvested.  Following the flow of money makes it easier for me to understand where the next best investment is likely to be.  For example, if people have money in shares and the share price is dropping where are they reinvesting the money. As part of the flow of money I am watching the markets to see government debts and how much money is being loaned into existence.


Why is Money Flow Important?

I am what is known as a Contrarian Investor.  A contrarian investor invests opposite to what the markets are doing.  This allows me to buy investments at the lower range and sell at the higher range.  If everyone is selling shares, the share price is dropping.  A contrarian investor is buying.  It’s like having a sale on shares as the price is low. 

Once I know where the money is flowing to, I can then start selling that particular asset.  With high demand for the asset, the price will go up and I can sell for a profit.  This whole cycle means I am selling high, buying low and generating income and capital growth at the same time.

The only way I can use this strategy is to understand the money markets, investments and money flow and the use of asset and liability creation. Government intervention through Bonds and Quantitative Easing have an impact not only on the value of the currency and the value of the investment but the way the money flows.


What is Asset and Liability Creation?

Imagine you have £1000 in cash.  You deposit that money into a bank.  You have an Asset of £1000 and the bank has a Liability of £1000.  The liability for the bank is that at any time you may demand the money back.  Now they need to have an asset on their books so they create loans using your £1000 deposit.  This is called Fractional Reserve Banking


How does Fractional Reserve Banking Work?

Each time a deposit comes into a bank, they are allowed to lend up to 90% of the deposit.  In the table below I have assumed the loan is used to pay someone and the deposit goes back into the same bank under a new customer.  If this table were completed you would see the original £1000 deposit has generated lending of £10,000 in effect, the bank has created £9000 of new money.  (£10,000 of loans minus £1000 original deposit) 



Bank Deposit

Bank Lending

Running Total of Money Created

Mr A




Mrs B




Mr C




Mrs D




Mr E




Mrs F





The bank now has an asset on its books of £10,000 in Assets from the loans simply created from an initial deposit of £1000.  For me, following money flow, I know that every time money is deposited into the bank if will flow out as lending in one or more formats such as loans, overdrafts and credit cards.


How the Government Raises Money.

All governments need money to pay for services such as hospitals, schools, benefits etc.  While they collect taxes there is usually a shortfall.  To cover this shortfall, they issue Treasury Bonds.  The bonds have a face value and pay interest.  They then offer the bonds for sale.  Some are bought by Banks and some by Investors.  Now the government has raised the cash it needs to pay for the country’s services.  The government has created a loan that it has to pay with interest and offered the loan to whoever will buy it.  They have loaned money into existence.


What is Quantitative Lending?

In 2008, Quantitative Easing became a buzz word.  Central Banks/Reserve Banks/The Fed were pumping money into their countries to keep the banks afloat.  Now as we deal with the Coronavirus crisis we again have the situation of quantitative easing being pumped into economies.

Mervyn King, Governor of the Bank of England and Hank Paulson, Secretary of the Treasury, USA both reported that the situation in 2008 was so bad that the worldwide banking system was just days away from total collapse.  Without quantitative easing, we would have no banking system as we know it today.  Currencies worldwide would collapse and all deposits that the general public had with banks would have disappeared with the collapse.

Quantitative Easing is generating money as a loan to banks so they have deposits on their books and can then lend the money out.  It allows money to flow again.

All Money is Loaned into Existence?

I started this blog by saying all money is loaned into existence.  Any money we handle on a day to day basis, from the very first pound, dollar, euro issued by a government was generated as a loan.

The whole world is based on a debt economy that requires loans to be continually pumped into the market to generate the deposits, the savings and investments that you and I take for granted.  So, every time you spend money, invest money or deposit it into the bank remember all money is a debt that someone somewhere has loaned into existence and has to be paid for.



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