How to: small family fund

Discussion in 'Professional Trading' started by jr07, Oct 28, 2009.

  1. jr07


    Hi all

    Looking for help from anyone out there running a small fund for family-friends.

    Suppose you gather 10k from 5 members, and you turn the 50k into 100k over a period of a year,

    - How much do you keep of the 50k profit?
    - Do you charge this quarterly or yearly?
    - How do guarantee that they will be ok with this?
    - Do you charge a fixed fee? If so, how much and on what basis? How frequently?
    - I understand Interactive Brokers has some infrastructure aimed at doing this, anyone out there using it? How is it like?

    Many thanks
  2. I do it on a yearly basis.

    No maintenance fees. I charge 25% above the risk free instruments.

    Meaning if I started with 50k and got to 100k that means 100% profits.

    the risk free interest rate is let's say 5% at a normal savings account.

    So I charge 0,25*(100k - 50k*risk free interet rate)

    0,25* (100k - 52.5k)

    = 11 875 USD in comissions
  3. Suppose you turn the 50K into $5K over a period of a year? What if you go under and owe money to the brokerage on leverage trades (as you will not have much chance to "double" the money unless done so.)

    In other words, trading family money is a really bad idea, and not really fair to them. Almost all traders lose their money when trading. And $50K is chicken feed, which says you really have not proven you can yet trade longterm, successfully.

    Your should risk your own money first and prove yourself for AT LEAST 2 years and a lot of trades, unless you want to create a large hole in the trust they have in you.
  4. Or that too... I was assuming he was well aware of everything, and how it could be made... just make sure that whoever puts money with you is well aware of the risks they are incurring.
  5. I do not get the idea that he is much more likely to lose it than double it, occurs in his glee to ring up the funds... An account that small does not bode well for his ability to do so.
  6. jr07


    Well, I've been paper day trading stocks for about 6 months now. I spend about an hour before the market opens scanning the news, upgrades, downgrades, earnings if any. I identify 4 shorts and 4 longs, and then I wait for volume to confirm price direction by crossing its own 200SMA. After that I pretty much use manual trend lines to follow the trade. I place stop losses as soon as I enter trades, usually above-below the previous high-low. This past week I had a 44% win rate, but my average win was 269$ and the average loss was 112$. Total profit after commissions was $2,575 from a paper balance of $14,000, so about an 18% profit.

    But I wasn't asking whether I can trade or not, I was asking about process to set up a small fund, so let's get back on topic please!

    I have more questions,

    1) Do you open a brokerage account with all the parties signing under it? Would they have access to the account?
    2) How frequent do you report results? Weekly?
    3) Is there a way to automate the calculation-payment of the bonus of the manager? Are there brokerage accounts that do this?

  7. That may be a dangerous route... paper trading is a whole different level than trading real money for yourself, let alone with other people's money.

    Since that is not for me to worry about I will answer the questions you asked:

    1) I can't comment on that since I'm not a US citizen, so in terms of paperwork and legal stuff, it may differ from country to country.

    2) Brief update monthly and a more detailed report quarterly.

    3) Didn't quite understand, what's so hard of calculating the commision or have it in a spreadsheet or something? What do you mean by automated (sorry not native speaker)



    6 months. So you started shortly after the March lows? Please take this as intended -- but virtually everyone has made money, quite a bit in the time frame described.

    Next point -- paper trading is not indicative of real world results.

    Next -- I trade money for multiple friends/family members. I take no money from them. Why? I merely trade for them the same securities I trade in my own account. I have traded full time for 14 years so throwing in an extra trade or two for them is easy and a no brainer.

    Last, it sounds like you're new to this with asking about when to report results, whether they should have access to accounts, etc. I'd HIGHLY recommend that you trade some of you own money -- REAL $$$ -- before asking family for $$$.
  9. Quote from jr07:

    Well, I've been paper day trading stocks for about 6 months now.

    ABSOLUTELY IRRELEVANT. That is what I said above, this person has no business taking his family's money. Has established himself as a paper trader. has no clue about the emotions of real money at risk, or the fact that paper trading is step 1 in a long chain of things needed to trade well. This revelation is astounding, and shows it is even worse than originally suspected.

    But I wasn't asking whether I can trade or not, I was asking about process to set up a small fund, so let's get back on topic please!

    You do not seem to realize this last statement IS the question. You have NO business risking family or friend's funds, because none of this shows any evidence other than you are going to head for disaster... Can anyone who trades wake this guy up????
  10. the1


    I agree. I've traded money for others for a good few years and I will not touch family money. A few have asked and I have declined. If you lose family money you can throw those relationships out the window, no matter that they have stated they'd be ok with it. It's a bad, <b>bad</b> idea.

    #10     Oct 31, 2009