Accounting for an Investment Club

[Donald Allen]

On Sun, Jan 11, 2009 at 1:42 PM, John Gray <gray at agora-net.com> wrote:
> Hello,
>
> I've been trying to figure out how to account for money I've been
> putting into an investment club.
>
> The way the club works is one owns whatever percentage of the club that
> their contribution is of the total contribution.
>
> So, for example, if I have put in a total of $5000 so far, and others
> have put in  $15,000, for a total of $20,000.  Then I'd own 25%. And the
> club has assets that are tracked, so I know each month what the total
> assets of the club are (and for that matter exactly what my take is).
>
> I have an account in gnucash tracking my contributions.  So the real
> questions is how to manipulate that to what its currently worth?
>
> Each month (or periodically), asses an unrealized capital gain/loss to
> adjust the account to add up to what my share of the club is currently
> worth?
>
> Other suggestions?

I would suggest treating the investment club just like a stock or a
mutual fund. Define its account as a stock asset, and assign it a new
commodity in, say, the 'Investment Clubs' namespace. Make up a ticker
for it and don't ask for online quotes, since there aren't any. Assign
a virtual price of 1 to the shares of your initial purchase. Then,
perhaps with a spreadsheet, keep track of the incremental and total
returns since that initial purchase (updating as often as you get
return information). At any point in time, the total return is the
virtual price. So if the club gained 1.5% in the month following your
first purchase,  and then lost .5% in the month following that, at the
end of the second month, the virtual price is 1.015*1.005 = 1.020075.
You can use the current virtual price to assign a price to a
subsequent purchase and you can also use the price editor to enter the
virtual prices whenever you wish, and gnucash will compute the current
value of the asset for you (or with the right report settings, the
value at some other point in time, if you have entered enough price
data). I use exactly this method to track a non-publicly-traded
investment of mine.

/Don


>
> Thanks,
> John
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