Should i pool money with my friends and start investing together so we can increase the returns and buy more stocks and start investing together? - Seedly
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Anonymous

Asked on 07 Mar 2019

Should i pool money with my friends and start investing together so we can increase the returns and buy more stocks and start investing together?

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    Nope nope and nope.

    What are the benefits?

    Save on some commissions maybe.

    What are the risks?

    The autonomy of making Decisions.

    Everything can be sunshine when things are green and everyone's making money.

    If a Bad quarter or black swan event hits the company, the stock price may plunge. Everyone has different stomach for paper loss and you may lose a friend because you hold a differing view from your friend.

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    Bibiana

    Bibiana

    07 Dec 2019

    True!
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    Bjorn Ng

    Bjorn Ng

    Level 9. God of Wisdom

    Answered on 05 Dec 2019

    No, big nono.. just because I know money can literally destroy any friendship you have forged, no matter how long it is. I would think it is only possible if only 1 person makes the decision, and the others fully trust that person with the savings, which itself is already something I am not comfortable about.

    It's good to getogether and learn about investing and researching companies together, debating your point of views and ultimately purchasing the stock. Times are good, everything is good. But when times are bad (i.e stock price plunge), that's where things are gonna get wayyy tricky my friend.

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    I would not do that. Money has a way of destroying relationships. You can't guarantee that nothing will go wrong with your investment decisions.

    Even within family members, I'd only really do it for my parents to help them.

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    Bibiana

    Bibiana

    07 Dec 2019

    Agree with you... when things go bad, it’s hard to resolve even within family members.
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    Jonathan Ang

    Jonathan Ang

    Level 7. Grand Master

    Answered on 06 Dec 2019

    Unless you're really good, I would suggest not as money can destroy friendships.

    Be good at it first, then manage their money :)

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    Bibiana

    Bibiana

    Level 7. Grand Master

    Answered on 06 Dec 2019

    Money is a tricky thing... Even family members fight over it.

    I don't think there's a right or wrong answer for this. If you have already been through many challenges with your friends and you guys have a rock solid friendship, I would suggest trying out with a small amount (like a few hundreds) and observe how each person is like.

    Ultimately, you need to know that everyone has different say in which stocks to buy/sell/hold. You need to set expectations right at the beginning. If one person would to decide for the others, that would be the most idal, otherwise you would run into problems overtime.

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    For Me,

    NO.

    Unless, your friend give you FULL control and decision power of all investment decision in Black and White. And promise friendship would not be hurt regardless any issues arise.

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    Wallace Chai

    Wallace Chai

    Level 9. God of Wisdom

    Answered on 06 Dec 2019

    Not something that i would do. Reason is simple. Human are very sensitive when it comes to money. Also everyone may have different opinions on different stocks. He might want to invest in one that you might not want. Then if the stock that he suggested fly, problem might start.

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    Junus Eu

    Junus Eu

    Level 9. God of Wisdom

    Answered on 02 Dec 2019

    Not for stocks for a simple reason:

    If it goes well, everyone is happy. But if it goes south - you can just imagine how people will start pointing fingers at however picked the stock.

    I have seen people do it for real estate eg. shophouses in the Haji Lane area. While it is good to get exposure to prime real estate by pooling resources, the tussel comes if 50% of the group want to sell it now to capture gains, and 50% don't want to sell. ​​​

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    Yeo Enk Loui

    Yeo Enk Loui

    Level 6. Master

    Answered on 14 Mar 2019

    Hi!

    Personally, that's not something that I would recommend because there are alot of issues that may ensue.

    It's all good if you are making money but what happens when you are losing.. Is the party who is making the purchase decision responsible for the losses? .. or.. How do you ensure that a conflict regarding money doesn't break out among your friends?

    Ultimately, there has to be some sort of agreement beforehand if you are still keen to do this :)

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    I did that and it is still successful after a few years.

    BUT there is a criteria - Only 1 person makes the decision of buying and selling on a daily basis.

    It is having a manager on daily operations, but if there is any changes in the activities of the fund, all of us will come together and make a decision.

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    This can bite you back in many ways.

    Money has ways of destroying relations.

    There are many points to consider.

    1. How are the profits, dividends shared?

    2. Who owns how many % of the shares?

    3. If there is one party leaving the group, how? sell and return money?

    4. If company does rights issues, who provide the cash?

    5. AGM who is entitled to attend?

    6. Each person contribute how much? what if someone didnt contribute suddenly?

    AND MANY MORE QUESTIONS! Better to just save up and invest yourself. Your group can come together to analyse stocks but putting in money is best to do yourself

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    Frankie Rappaport

    Frankie Rappaport

    Level 10. Unicorn

    Answered on 05 Mar 2020

    You could do that as a 'gamble' club, low total money and democratic choices as predifined.

    But for serious investing, I would discourage from that.

    A friendship is too valuable, to be influenced negatively by finance, true?

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    No, you should not.

    While the short-term gains, e.g. lesser fees and charges may make the entire situation seems like a good deal, the long term effects are often more complicated than most can imagine.

    For instance, how are you all going to split the profit? What if there are different decisions on whether to hold or sell the stocks?

    Most importantly, who is responsible for the accounting?

    Therefore, invest on your own. That is what I will do.

    Here is everything about me and what I do best.

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    Gavin Tan

    Gavin Tan

    Level 5. Genius

    Answered on 05 Dec 2019

    Personally, I did it with my group of friends, but I'm the one calling the shots. I think it's important to set down some ground rules, and to have only 1 person calling the shots. If everyone wants to call shots, no one will be happy in the end.

    Currently my portfolio is already yielding 7+% after a little over a month, outperforming STI by almost 8%.

    It is a good way to increase returns if you hve limited capital, but only do so if you know what you are doing, i.e. you already have some experience in the stock market and have a general game plan as to what to buy, when to take profit when to stop loss etc.

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    Cornelius Tan

    Cornelius Tan

    05 Jun 2020

    Hi Gavin, I'm new to investing and also wanted to pool money with a group of friends to invest. However, I'm not really sure on the legal end. Are we legally allowed to pool money and invest?
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    Adelyn K

    Adelyn K

    Level 5. Genius

    Answered on 05 Dec 2019

    Unless each of you can be responsible for your own decisions and won't point the fingers if the stock isn't doing too well, it's a bad idea overall. You need to consider what happens if some wants to sell and some don't. How are you going to split the selling up evenly? I would rather pool money with my parents/family members than with friends.

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    Money and Friendship never end well together

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    There is not much difference doing this unless you guys are pooling 1k each throughout your entire journey.

    Looking about the pitfalls of business is the more effective way towards maximising returns​​​

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    Carol Tham

    Carol Tham

    Level 3. Wonderkid

    Answered on 02 Dec 2019

    You can consider that since more money means there are more things you can get vs alone.

    however, there might be complications if the matter is not handled properly. So perhaps an agreement would need to be drawn up or see if it can be run as a fund of sort. 🤗

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    Koh Jun Jie Jason

    Koh Jun Jie Jason

    Level 5. Genius

    Answered on 02 Dec 2019

    Who is to lead the investments?

    Is there a plan when to back out?

    In the end is how money or friendship do you value more​​​

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    Lee Jiahui

    Lee Jiahui

    Level 6. Master

    Answered on 08 Mar 2019

    Assuming all the admin others have mentioned isnt an issue...

    1. Assess risk of friend taking money and run. For me, max 10k cash.

    2. If wanna create partnership, need to be minimum 100k each to be cost efficient. Yearly $75 and filing to acra. Yearly filing to iras cos taxable dividends. Accounting.

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