A Fund vs. Your Own Money

Discussion in 'Professional Trading' started by Opulence, Oct 16, 2012.

  1. Opulence


    I'm sure that we have people on here that are successful at trading their own money and people that own successful hedge funds. But I want to hear from both sides.

    I want to hear why you think owning a fund is advantageous or why you choose to trade using your own money.
  2. Freedom. You can google the terrm to get a fuller picture.

    If you have worked at any time, you will notice that working when you want to is a better idea whose time has come.

    There has been no need for full employment since the 50's. Therefore, why would anyone work full time of even work at all.

    You can have all the capital you wish. The market allows anyone to take any amount of the offer they wish.

    Make a wish. Get it. Do what you want.

    Nice handle.
  3. heech


    The two aren't really all that similar. Trading is just a small (albeit critical) part of the fund business. If you WANT to get into the fund business, then seeding with your own assets is certainly a great way to make that happen.

    Say hypothetically you are successfully trading your own assets... What are the considerations versus starting a fund?

    On the plus side, the most obvious one... you make more money. More gains when your strategy is up, same amount of losses when you are down. You also get to share your fixed expenses, be it Bloomberg or data feed.

    On the down side, you have all of the typical overhead of a business. More filings, registration tests, registration fees. You need business card and letterhead. You need a phone line and a web presence. You might need to manage employees (both due to increased trading AUM and to "prove" you have operational capability). You have SEC / NFA regulatory hurdles, as well as state by state filings. You have to pay for an audit / generate tax filings. You have to market your business, and then follow up on leads... And you have to do this for years without any real money coming in. And when investor capital comes in, it's not any easier. Now, you'll get calls about your portfolio weight... Are you in cash right now? Why the hell not? Why are you down so much this month?

    So, again, trading success is just a small part of deciding whether this is a good path for you. Personally, I enjoy starting up businesses, and I had a lot of capital to work with... So I didn't mind the initial overhead when all I'm doing is writing "pointless" checks. The first few years I was 95%, then 85%... Then 75% of the fund. Finally this year (start of my 4th) I'm on the verge of falling below 50% of AUM, which means the business is really finally "a business". But it's been a long trek and I'm definitely not sold on the long term value or viability.
  4. To simply answer your question, if you use your own money, you are not subjected to alot of regulations since u get whatever with your own money.

    When its a fund, theres 2 possibilities. Your own money vs Not your own money. If you are serious and good, a properly structured fund means u may "open" your fund to private investors, not talking about public yet.

    So a "fund" means its scalability, but it is subjected to a few regulations.

    For eg. I have 100k trading my own money, but i believe I can benefit my friends and family, so i can at least put forth a properly structured fund with some basic rules, and they invest alongside me, meaning they buy what i buy and sell what i sell, and we share our losses or profits.
  5. all these things make sense when you are consistently beating the S&P or let's say 20%. Any more than that, you don't need anybody.

    20% aint quite enough to make a living off of, unless you have a lot of money

    in which case you need others
  6. 20% not enough to make a living?? But isn't that the point. If you can consistently do 20%, then you will eventually get to the point where you wont need anyone's else money, meaning you will have lots of money. I guess it depends how impatient/patient someone is. If they are willing to just keep being consistent, year after year, then they will prob never need anyone's money.
  7. Hello. Let's say u start off with 100k. 20% is only a mere 20k. For living ?

    Come to Singapore. A typical house for the norm is around 1 million, take away currencies difference. That's roughly $2000 a month or 24k a year.

    100k ? Living ? Taxes ? Blackswan ?
  8. maler


    Nowadays 20% just allows you to keep what you have.
    After taxes what you are left with barely covers inflation.
  9. It's hard to imagine why anyone who can consistently make 20% a year or more would want to start a fund. Two reasons that come to mind are as a pure ego play ("Look at me, I'm a hedge fund manager!") or as a temporary move for a few years to escape severe capital constraints. The second is reasonable, but for the first there are IMO much better ways to offset boredom.
  10. my 90 year old mother has been in the Vanguard S&P 500 fund for the last 20 years. I think she has beat 85% of all fund managers on Wall Street. But she isn't accepting any new clients.
    #10     Oct 22, 2012