Investment club: operation, structuring and advantages

The Investment club is a popular solution for those who want to invest together to maximize their returns while sharing risks. The investment club allows for the continuous and collective management of funds on various assets. Why is this model attracting more and more investors? Let's dive into how it works, its benefits and its fiscal framework.

What is an investment club?

Definition and principles of investment clubs

One Investment club is an association of people who pool funds to invest together. These investments may concern shares, bonds, SCPIs, cryptocurrencies or other asset classes.

The big one Difference with a Club Deal is that the latter brings together investors on a single and temporary project, while an investment club manages a diversified portfolio over the long term.

What does an investment club do?

An investment club is based on collaborative management where each member actively contributes to financial decisions. It is not only a pooling of capital, but a dynamic of sharing knowledge and strategies to optimize investments.

The club's mission is based on three main activities.

• Asset selection: identification of the most promising investment opportunities
• Investment management: monitoring performance and adjusting strategies according to the market.
• Strategic meetings: organization of regular meetings to make decisions and guide the club's investments.

How does an investment club work?

How many members can an investment club have?

The number of members varies, but a Effective club generally consists of between 5 and 20 people. A small number facilitates decision-making while benefiting from good diversification.

What is the structure of an investment club?

Internal organization

Each club should designate key roles:

• President: Facilitates meetings and ensures the smooth running of meetings.
• Treasurer: manages funds and transactions.
• Secretary: ensures administrative follow-up and reports.

Decision-making mode

Investment choices are validated by a Collective vote at regular meetings. Each member has one voice and can express their opinion on the various investment options offered.

These meetings make it possible to analyze asset performance, discuss future opportunities and adjust the strategy according to market developments. This democratic approach ensures transparency and equitable involvement of all members in portfolio management.

Portfolio Management

The portfolio is managed according to the goals of the club, with a asset allocation according to risk and return strategies.

This involves rigorous monitoring of performance and diversification of investments to limit risks.

Each allocation decision is taken taking into account the profile of the members and the defined investment horizon. The objective is to optimize earnings while controlling portfolio volatility.

How do I join an investment club?

How do I join an investment group?

Each club defines its own entry criteria to ensure good cohesion between members and ensure effective management of funds. Among the main integration conditions, we find:

• A minimum financial contribution: each club sets an initial investment amount and regular contributions to ensure equitable participation in investment opportunities.
• An active commitment: members must attend meetings, participate in decisions and be involved in the management of the collective portfolio.
• An alignment of objectives: some clubs prefer investor profiles with similar investment strategies or horizons to avoid major differences in decisions.
• Specific internal rules: Each club has its own membership terms and conditions, which may include a trial period, sponsorship by a current member, or minimum investment experience.
• Investment experience: some clubs are looking for members who already have knowledge of financial markets or experience in asset management. This expertise makes it possible to ensure constructive exchanges and informed decision-making.

How do I find investment clubs?

You have several options to find an investment club that meets your expectations.

Specialized online platforms make it possible to identify existing groups and to apply according to their objectives and profile.

There are also numerous investor associations that also offer private clubs, often accessible after a period of exchange and networking.

Some banks and brokers offer the possibility of joining clubs supervised by experts, thus offering structured support and better selected investment opportunities.

Integrating a well-organized network has several advantages: you benefit from collective expertise, knowledge sharing and a regulated framework that secures your transactions. It is also an opportunity to develop your network in the world of investment.

What is a private investment club?

A private investment club works on the same principle as a traditional investment club, but it is reserved for a select group of investors. Unlike open clubs that accept members upon request, private clubs impose more selective admission criteria, such as minimum capital, investment experience, or co-optation by other members.

The main advantage of a small club lies in its exclusivity, which allows for better governance and a more rigorous selection of investment projects. Members benefit from a more structured environment, with opportunities that are better studied and often inaccessible to the general public.

Advantages and disadvantages of investment clubs

What are the advantages of an investment club?

Investing in a group has advantages that you will not find by investing alone.

First, the strength of the group makes it possible to spread risks and invest more. Together, you gather more money to diversify your investments. For example, with 10 people putting €100 each, you create a €1000 portfolio that allows you to buy several types of shares.

Learning and sharing experiences are also essential. Each member brings their knowledge: some understand tech better, others master financial analysis. These exchanges allow everyone to progress more quickly.

Networking and access to exclusive opportunities complement these benefits. By joining forces, you have access to investments that are impossible alone, such as shares in promising start-ups.

What are the risks and limits to anticipate?

However, there are a few things to keep in mind before you start.

Managing conflicts and making collective decisions can be tricky. An agreement must be found between those who want to take risks and those who prefer to be cautious. Clear decision-making rules are essential.

Administrative and regulatory constraints should not be overlooked. A club must be officially declared, keep accounts and respect specific fiscal rules.

Long-term commitment is a reality to be accepted. Unlike traditional savings, the money invested is not available immediately. Several years of investment are needed to reap the benefits.

Legal and fiscal aspects of investment clubs

Is an investment club a security?

No, an investment club is not a security in itself. Rather, it is a structure that makes it possible to invest in securities. The difference is important: a security such as a share can be bought and sold quickly on the stock exchange, while a club is a sustainable structure where members invest together.

In practice, an investment club is an association of persons, generally in the form of “voluntary joint ownership”. This legal structure is recognized and supervised by the AMF (Autorité des Marches Financiers). The members are “undivided”, meaning they own the investment portfolio together.

Taxation of an investment club

The taxation of an investment club is simple to understand: an investment club benefits from a special tax regime, based on “fiscal transparency”. In other words, it is as if each member managed their part of the portfolio directly.

Income such as dividends and interests are declared individually by each member in their personal tax return. The bank that manages the club account sends an annual summary detailing everyone's share. This income is then subject to the traditional taxation of financial investments.

As far as capital gains are concerned, the regime is specific: the gains made during the life of the club are not taxed. Taxation only occurs when a member withdraws or when the club is dissolved. These capital gains are then subject to the flat tax of 30% or to the income tax schedule, whichever is more advantageous.

This advantageous tax regime is subject to specific conditions.

• Maximum 20 members.
• Payments limited to 5,500 euros per year and per fiscal household.
• Securities account required at an approved institution.
• Activity limited to the management of an investment portfolio.

Good to know: The taxation of investment clubs differs from that of the taxation of a club deal which concerns grouped investments in real estate or unlisted companies for private equity club deals.

Conclusion

An investment club is an excellent way to start investing while benefiting from the strength of the collective. It offers numerous advantages: risk sharing, knowledge sharing and access to exclusive opportunities. But it also requires real commitment, both financially and humanly.

Before joining a club, take the time to assess its structure, operation, and compatibility with your investment goals. A good club should have clear rules, a solid organization, and members who share a common vision of investing.

Do you want to explore collaborative investment opportunities? The Overlord Business Club brings together investors sharing the same values and ambitions. Find out how you can be part of this community of committed investors.