Hey, another Newbie here - enjoyed reading the forums and gaining some valuable information. Question - Would any of you seasoned investors share the pros & cons of managing family / friends money? I have a couple that want me to invest a portion of their funds and I was curious to what it did to your relationships with them? Also, did it cause you to modify / change your investing patterns? Thanks!
If you trade profitably, the relationship will be enhanced. If you lose your friends' money, you can expect to lose the friendship. If you lose family money, the relationship will become strained. Start small and add money as you become progressively more profitable. It's easy to ask for more money and referrals after you've made money for someone else.
There's been a few threads on this topic, so make sure to use the search feature on the site. Simply - if you value the relationship, leave money out of it. As soon as money is involved, relationships change NO MATTER HOW 'CLOSE' YOU WERE PRIOR.
Hi, I will tell you from first hand experience. It is ok to do as long as the people whose money you are taking are VERY CLEAR of the risks they are taking. I started my career borrowing from my family, only to lose it very quickly. In 1999 I borrowed $30,000 from another family member and wrote him a check nine months later for $600,000. In 2002, I had some friends who had begged to invest with me. I let them invest $25,000 and I lost, right along with the friendship (they even threathed to sue me). I guess like anything in our business........its a risk!
Please I speak from experience DO NOT do this. I repeat Do NOT do this. This will be one of the most stressful endeavours you will undertake, especially if you start losing. I did it with my brother last year and proceeded to have a big drawdown in his account. He got extremely upset when he found out about the losses. Well needless to say, this all culminated in a nasty fist fight on my mothers backporch in the Fall. As we were slinging it out with each other my mother was screaming and telllng us that she was gonna call the Law. We didnt talk for months after this and only recently we have just started talking again to each other in the last week. Incidentally, I messed my shoulder up in the fight and it still isnt right. You might do well and produce profits for yor relatives. But in my opinion the reward is not enough to offset the potential risk and what this risk could entail as far as your relationship with your family/friends.
Well, there you go - actual, real life horror stories. Just like trading you have to examine the risk to reward. In this situation your risk is limitless and reward is minimal. Think about it - how much are you going to take from them if you make money? And if you do, then you will never hear the end of it. Sounds more like a lose/lose situation for you.
Not to sound too mercenary about it, but if you lose a stranger's money (we're assuming they understand and accept the risk) then you lose their business and any future positive recommendations. Lose the money of friends and family and you'll lose something that very well may be irretrievable.