How do investment pools determine profit share for each individual member in an ever growing pool of investors

For example, if an investment pool/club has one equity/account, how can each individual's percentage return be calculated as the pool grows month by month?

I would expect the individual profit to be based on each person's contribution. Suppose you have a pool with $20k. A new member joins and makes a $1k deposit. You now have $21K and the new member has a 4.76% share of that $21k. Thus his share of profits from that day forward would be 4.76%.

As members join, leave, make deposits or withdrawals you just recompute each persons percent of the balance at that point. With computers it wouldn't be difficult.

I would imagine it would be similiar to the way capitol gains are paid on a mutual fund, which is a pool of money invested in basket of stocks. With a mutual fund, capitol gains are paid at the end of the year. The fund company calculates the percentage, the amount paid out in capitol gains. If that number is 5.50%, then the calculation would be 5.50% of the money you have invested, that is paid out in capitol gains. Hopefully that helps.

It's a simple 2 step math problem.
1. You divide the individuals total invested by the total amount of money in the fund.

This number will give you that investors "percentage" of the fund.

2. Next you multiply that percentage number you just got by the dollar amount of total profit received, and that would give you a dollar amount for that individual investor.

The more members you have the more time it takes to figure this out. I was in a stock investment club for about 10 years and we had 3 treasurers at the same time to triple check each others math.
Good Luck.
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