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Would you trade with a relatives money?
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Would you trade with a relatives money?

  #11 (permalink)
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been contemplating to do this for a while, i will do this nearing the yearly results which should come in a couple of months. my trading and my mind have been burdened for quite a long time and i need to take action while i'm net positive just like you say. better to ride the through the rough wave by myself rather than involving them which would make things worse.

for anybody else who have never been doing this: better to not do it from the start.
you will regret it sooner or later!

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  #12 (permalink)
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I'm surprised at these answers.

I have to offer a different side. I find having to manage OPM (includes friends and family) actually improves your sense of responsibility, and in turn, results. If you're feeling bad about managing someone's money, whether it's a friend or relative, then chances are that it's your subconscious telling you that there is something wrong with your investment strategies that you are not confident about.

Principal-agent risk penalizes capital with a premium. By acting as a relative's fiduciary, you can compensate this cost (unless you have a record of misappropriating your family's assets). If so, you are already doing them a service that outperforms the market. Capital also has "storage costs". You are doing them a service if you are reducing this, either through asset substitution (e.g. municipal bonds for taxable bonds, on-the-run for off-the-run treasuries), special purpose vehicles, forwards, swaps. There's no reason to feel bad about doing someone better service than they can receive elsewhere, unless you have some self-punishing problems.

Granted, I am very cautious with the two-way relationship between the person and myself - I've turned down many opportunities from the start if our expectations are misaligned.

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  #13 (permalink)
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hello artemiso, thanks for your response. lets discuss it further as i believe i need more input about this also because my inexperience on managing OPM has been putting me into psychological burden.


artemiso View Post
then chances are that it's your subconscious telling you that there is something wrong with your investment strategies that you are not confident about.

i'm pretty confident and its actually enough for myself but 1 of my family member whose money i managed have irrational profit expectation ratio by wanting to keep accumulating his profit and retire through me. i'm not sure how it would turned out in the long term but i do this (trading) because i don't want to have a boss and now i feel like i have one which i didn't like doing so.


artemiso View Post
unless you have some self-punishing problems.

sorry, i didn't understand. what do you mean?

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  #14 (permalink)
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Harlequin View Post
i'm pretty confident and its actually enough for myself but 1 of my family member whose money i managed have irrational profit expectation ratio by wanting to keep accumulating his profit and retire through me. i'm not sure how it would turned out in the long term but i do this (trading) because i don't want to have a boss and now i feel like i have one which i didn't like doing so.

Yes, if your expectations are misaligned, do not even take up the capital! I find the trading-related expectations (e.g. drawdown, risk, return) are easier to work with because your investor already gives you his/her desired E(R) and lambda, and your job is just to dial the rho and sigma and see if his expectations are either realistic or not. It's either yes or no. If no, you reject him/her. If yes, your job is to tell him that you cannot promise anything other than losses. You will either get a yes or no from him. If yes, your job is straightforward from here: organize the appropriate entity to issue state-contingent securities that create the desired payout patterns, and maximize your tax and regulatory efficiencies with SPVs, asset substitution and 'balance sheet arbitrage'.

Philosophical expectations are harder to work with, and they come in all flavors. Sometimes, the answer is obvious: If someone wants me to design a 130/30 portfolio for him, or "something socially responsible like stocks in green companies" (can't believe I've actually gotten these), I give the finger (in a nice way). Sometimes, it is difficult to decide on the right answer: Just yesterday, a wealthy lawyer suggested buying out a portion of my management firm - like a venture capitalist - so his share is managed as a principal's rather than a limited partner's. But I said no, because I didn't want someone who had no knowledge of the field to have the capacity to make management decisions or be privy to our implementation details.


Harlequin View Post
sorry, i didn't understand. what do you mean?

As in, there's no need to feel bad if you're already giving your best, unless you just hate yourself for everything that you do.

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  #15 (permalink)
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artemiso View Post
Yes, if your expectations are misaligned, do not even take up the capital!

ditto. my mistake, as an ancient proverb in my country says "the rice has already become a porridge"


artemiso View Post
give the finger (in a nice way)

should have been doing this loooong time ago.
anyway which finger is your favorite: thumbs pointing down or the middle finger?

thanks for your input. have a great trading journey mate!

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  #16 (permalink)
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Harlequin View Post

I'm pretty confident and its actually enough for myself but 1 of my family member whose money i managed have irrational profit expectation ratio by wanting to keep accumulating his profit and retire through me...

Prepare a contract with any OPM member and define:
1) individual drawdown limit percentage on first investment - that triggers a stop and rest money back
2) NO minimal gain expectations
3) payback terms (date and amount)
4) what to do with gains - hold or stack up

With these four parts you are able to trade your money as well as money from others in ONE pot.
No more hassle with daily calls while choppy times when your nerves are already tested.

Treat it like a small company - there are investors - the risks are there and shared - the results are posted quarterly,
half yearly or yearly. Then every investor can decide to stay or leave.

GFIs1

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  #17 (permalink)
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Shouldn't trade with any money you can't afford to lose. In my opinion, any money you put in a trading account should be earmarked "for disposal." This is a way of recognizing and taking responsibility for the unpredictability and volatile nature of the markets.

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  #18 (permalink)
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Harlequin View Post
thanks for the poll Mike. actually this is the current situation which make a great dilemma to me.

I accepted to manage some of my family money ( 3 members exactly). encouraged by my early success as trader they want their money to be managed by me with 50% profit sharing each month. the payoff is nothing really spectacular - my monthly performance is around 8-15% but it's still higher than the deposit rate, right? i'm still developing my skill as a trader but that is the result i can give to them consistently each month.

because of their kindness to me when i'm having troubled times i feel i have no power to reject them at that times. 2 of them didn't make a fuss about my trade and they didn't ask me each month how their money has growth unless i give monthly report to them and 1 of them keep pestering on me each day which annoyed me and make me feel pressured when i have a draw down period.

i've been thinking to cut them all but i don't know what to say especially to those 2 who have been supporting me all this time even before i make it as a trader.

have i known this would happened i would reject them all and just give them nice gifts each year just like you did now. damn!


You need to be congratulated for doing 8-15% per month, consistently. That in itself is pretty remarkable, regardless whether you share with your relatives. You should be starting a fund instead!

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  #19 (permalink)
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kevinkdog View Post
You need to be congratulated for doing 8-15% per month, consistently. That in itself is pretty remarkable, regardless whether you share with your relatives. You should be starting a fund instead!

eh? i thought it was pretty average monthly rates to folks here who are doing day trading?

average 1% R-R per trade and just repeat it several times a day with your favorite method (im using vsa mainly). multiple monitors help though - to find best trading opportunities.
there are 20 working days each month to do this so i think it's achievable?

as i said i'm still developing and still miss it here and there. i'm trading accompanied with my friend and mentor whose monthly performance FAR outperforms me

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  #20 (permalink)
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Harlequin View Post
eh? i thought it was pretty average monthly rates to folks here who are doing day trading?

average 1% R-R per trade and just repeat it several times a day with your favorite method (im using vsa mainly). multiple monitors help though - to find best trading opportunities.

as i said i'm still developing and still miss it here and there. i'm trading accompanied with my friend and mentor whose monthly performance FAR outperforms me

8-15% per month is 100-200% per year. I could be wrong, but I'm guessing that is in the top 1 or 2% of traders. Especially if you are doing it month after month, consistently.

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