[Tcohle]

Basically, my brother and I are interested in getting together and making investments. The goal is to educate ourselves about the market and it also just sounds like an interesting thing to do. I don’t think we’d put in a ton of money. Just something on the side.

So we were thinking (brainstorming) that we could pool X amount of dollars/month and put it into an account. Then we would have regular meetings to determine where we could invest money. Whether it’s just putting it into a mutual fund for now or finding companies to buy stock in.

There might be a few other people involved so we agreed something should be in writing. Is this technically a Personal Holding Company? Anyone have any suggestions on how to get started, or their experience, good or bad, with doing this?

FAR- 5/11/15 76!!
AUD-10/31/15 63, 84!
REG-7/12/16 72
BEC-8/31/15 75!! Perfect Score!

Wiley CPAExcel Platinum
Ninja 10 pt combo for FAR/AUD/BEC

[NebCPA]

Personal Holding Company per the IRS (https://www.irs.gov/pub/irs-pdf/i1120sph.pdf)

Personal Holding Company: Generally, a corporation is a PHC if it meets both of the following requirements.
1. PHC income test. At least 60% of the corporation's adjusted ordinary gross income for the tax year is PHC income. See the instructions for Part II and the Worksheet for Figuring Ordinary Gross Income, Adjusted Ordinary Gross Income, and the PHC Income Test (Worksheet), later. Also, see Specific Instructions below.
2. Stock ownership requirement. At any time during the last half of the tax year, more than 50% in value of the corporation's outstanding stock is directly or indirectly owned by five or fewer individuals

If you’re not planning on setting up a C-Corp, then don’t worry about the PHC status.

As for the idea of setting up an “investor club,” I like the idea. Like a few of the people who have posted earlier, I’m a random walk theory type of guy, so I focus of passive investing and low costs, as in an efficient market, active investing just doesn’t pay off. However, you’re not talking about putting your retirement into this. Keep your 401(k) and your retirement invested in passive index funds, but feel free to setup a small fund on the side to have some fun with. Who cares if you lose a bit of money or fail to beat the market? The act will allow you to satisfy your behaviorist investor urges and allow you to learn a bit about the market from actual doing, instead of reading.

As for using a fake account or pretend money instead of a real account, I am against this for a couple of reasons. First, these accounts often do not fully encompass fees and taxes, so it over inflates your performance. Second, because there is no actual risk, your risk appetite is unlimited. Using real money, in a real account, allows you to fully understand the costs of active investing and allows you to truly feel what it is like to make hard buy/sell timing decisions. It’s a fun experience; just don’t put all of your investment eggs into one basket – make sure your retirement and emergency fund needs are kept separate.

[TheblackCPAseeker]

This is actually a great idea. I recently set up an LLC with three other friends to start an investment club solely trading in stock. We each make monthly contributions and invest in stock in 3 major industries that we picked ( Healthcare, construction and Technology). The returns are definitely slow but you learn a lot about investing and the money does grow just with the contributions.

FAR - 80 (05/2015)

AUD - 68 (08/2015, Retake (07/03/16)

REG - 77 (11/2015)

BEC - Sometime in 2016

We are destined for this.

[Author]

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