Investment Clubs Manual019 - B Is the total number of units...

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Unformatted text preview: B Is the total number of units bought by all the members. C is the current value of each unit. So, you divide the value of the club's net assets by the number of units issued to members and that gives you the current value of a unit. Still not got it? Don’t worry, the penny will soon drop. Let’s take an example: Your club has 10 members and you decide each member will pay an initial lump sum subscription of £50 then £20 a month. All the money will be used to buy shares. MONTH 1: Everyone pays £70 so the club has got £700. The UVS is based on £1 so everyone has 70 units. At its first meeting, the club decides there's not enough money in the kitty to buy a share yet. MON11-l 2: All members pay In their £20 (total £200) and a new member, Fred, joins. He pays his £50 joining sub and his £20 so now he has 70 units and the original members have 90 unlts.The club has £970 in the bank but again, erring on the side of caution because they can't decide which share to buy, the club puts off the first purchase decision for another month. MONTH 3: Now 11 members pay their £20 and there is £1,190 just dying to find its way onto the stock market. The founders have got 110 units each and Fred has got 90. The club buys 500 shares in Somefirm pic at £2 each. Wlth brokers’charges the cost is £1,030, leaving £160 in the bank. Success. Vlfithin a week Someflrm plc strikes gold and the shares go up by 50p, from £2 to £2.50. The 500 shares are now worth £1,250.There‘s £160 in the bank so the total asset value of the club is now £1,410. Remember 1,190 units have been Issued. So, divide 1190 into £1,410 and you come out with £1.18. Each £1 of a member's subscription is now worth £1.18.That's an 16% profit! Each founder member’s share of the portfolio is worth £129.80 and Fred (who has paid £20 less than the others into the kitty) has a holding totalling £106.20. October 2008 ProShare Investment Club THE MANUAL ...
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