It's not an easy task, unless your friends/family REALLY understand that you can actually lose it all. So if they give you 5% of their Net worth, then perhaps your relationship could survive the worst outcome, you have to consider this, before counting potential future profits. All is relative to what %age of their Net worth they will be committing and otherwise their kindness and forgiveness levels. Gary has nailed it by saying do not do business with family members! But since you have no track record, just a strategy I assume, you can't take that to people you don't know as they will not commit, unless you are at least acquainted. So how do you progress? Do you have any savings you can afford to lose? Maybe you can sell some accumulated junk? Maybe find some other like minded people with some minor capital, start a trade club, where all trade decisions will be joint, perhaps you could be a "chairman" of that club. The odds increase by applying same method across different markets, your own capital will probably disallow this, so joining forces with others might be a good solution. Also, you will get used to making trade plans and presenting them to other members so you can make a final decision by voting perhaps. We have these sort of clubs in the UK. Some do really well.
Why do you want to trade OPM ? Are you that undercaptialized ? Been there done that and you will get sick and tired of people calling you all the time wanting to know "how's it going". People are very emotional about money and they will hate you when you lose and hate you win because they are naturally greedy and will push you to make more and take more risk just to make them happy. If you want to trade, do it on your own with a small account and build it slowy, this will give you time to adjust to slowly taking on more risk versus just having alarge pool of money from the start to manage. If you are dead set on this, I would take this route. Draw up papers for a personal loan from these people. Pay them a better interest rate than what the bank pays and allow your max drawdown to be only the amount you put in the trading pool. You will then have more capital to trade, without the BS of having to answer to all of these people whether or not you are losing their money. Make payments to them each month on time, they are happy and you will be happy as long as you know how to trade, if you don't then worst case is you only lose your total risk capital but still maintain good relationships with the others. If you fail, you can always save up again, take loans from them, which they will be happy to do because you treated them well before. This also will allow you to bypass havign to get any licenses to trade OPM.
Typically I am totally against borrowing for trading purposes BUT given the options laid out here I would agree that it does make better sense to do it this way. Trading OPM is just a no win situation.
For the same reason young men and women from all over the world want to work on Wallstreet to be top traders and money managers for the next billion dollar hedge fund.. Lets see.. If I was a manager for a billion dollar fund, and I made just 1% ... I'd make 100 mill a year. Lol, after 1 year, I could retire. I know I'll never work for that kinda fund, but to manage a couple million..thats not a bad living. cm69
cash - as the other guys have said, there is no easy way to generate millions of dollars to trade easily. That's part of the game. Maybe you could start a signal calling service to generate some immediate cash flow all the while putting together a track record. Not sure how you trade, so you could either do a daily email newsletter or if intra-day, start a chat room. You could also get a system up and running on collective2.com. It's inexpensive to start a system and you could get immediate access to their regular members and still build a record. You could literally start this today. Just an idea.
This is probably the worst motivation you could have... Any trader will tell you that comparing yourself to another trader is a bad idea. These great hedge funds are run by traders that have been around a long time, with a (or in many cases several) proven methodology. You can't just flip open a copy of trader monthly and think it's easy to run a multimillion dollar hedge fund. There's probably hundreds of failed/insignificant funds for each one of these. I really like volente's advice, seems like he's actually experienced this (for better or worse).
Well, it's good to experience external pressure for newbie. Going through OPM stress for the first time, later on your career takes more time to adjust. Also, I can guarantee that it will affect the way you trade / develop models. Some perform better if they have outside influences pushing them, some do better just trading their own account. After a while, both becomes the same, anyways... In terms of how you do it. Just sign the Power of Attorney, and trade it. What ever you do to your relative before the trading starts won't make a difference. Once they start following your performance, they will do how they feel like doing, it's not their intention to keep their minds straight while their account is jumping and hopping. That's one big reason why there's due diligence for hedge funds.
That's not a bad idea....I think I'll do that. but dont MOST people, think that these guys selling news letters are full of shit?.. It's too easy to say on a website how good a trader you are, but hard to proove it. If I were to actually do this at some point, how much could I charge monthly?... what's reasonable? cm69
I would use google's advertising, it will be a hit and miss venture for sure, a lot WILL depend on marketing (look at Kingfish) and of course verifiable results, even if you just trade a very small amount per trade. I wouldn't charge much, I would most definitely use a FREE trial period of at least 1 month, you will not be losing anything, there is only benefit. As far as fees are concerned, again I would charge a reasonable amount, perhaps $30-$50 p/m. Good luck!