1. Choosing the end of year allocation method
2. Choosing when the end of year allocation will no longer add or subtract units
In the past, both the number of units owned and unit value changed at the end of the year, after running an allocation. This practice started before computerized accounting programs and was done in an effort to mimic mutual funds, who pay out all their earnings annually, and whose shareholders, mostly, reinvest those earnings back in the fund.
Investment clubs, unlike mutual funds however, do not have to pay their earnings out each year. Moreover, the members are taxed on those earnings whether paid out or not. Because a member's value does not change simply because taxable income has been allocated, the accounting system was forced to also make an offsetting adjustment to the unit price. In the end, members would end up either with more units, which were worth less per unit, or fewer units that were worth more. The end result was that their value would not change.
On the advice of our accounting advisors, ICLUB began to offer an option in the early 2000’s to no longer distribute units at the end of each year. Again based on our accounting advisors, we set 2009 as the last year when this would be optional; after this date, the system no longer added or subtracted units at the end of the year.