Managing money

[JGotti]

Happy new year,
I have been approached by my older brother and a cousin to invest money for them. They are not the first and I hope not the last. I want to start my own investment firm and hopefully expand if possible. What would be the best way to go about this? most cost effective? any helpful resources,websites?
thanks in advance

[lehayes]

Well, that is something I tried this last year. I have a system that I use and I was able to show many people how I did it. They didn't want to take the risk and fail at it so they asked me to do it for them. Along the way, I learned that I was being taxed on their earnings of their money. I also learned that they only want the good part of the deal, if you have one bad stock on one bad day, they want you to pay them the difference of the loss so they don't lose any money even though you clearly state the typical "It is investing, it is risky and you may lose all your money" statement. Bottom line was that as long as you were losing money and they were still making it, then it worked out fine. If any came out of their money, they didn't want to play any more. I was even working on a system where I could take in large amounts of money from various people and play it with my system to make some really good returns. When I got this response from them, I decided it was not even a good idea to try it on a larger scale. One of them still hounds me for a payback on the money. It was a single trade, single loss and it was only about 8% of their investment. They could not get it through their heads that it was a process of minimizing the losses and maximizing the gains.

Now in addition to this, you will have SEC snooping around your account if it gets unusal amounts of money in it or really frequent amounts dumped into it. Keep in mind that when you signed up for your account, they got basically a statement that told how much you make annually and the type of work you do. When you account exceeds this expectation, it sets off alarms for investigations, especially after 9-11. I avoided this by having them open their own accounts and I worked in their accounts with them capable of monitoring the progress. I think that was an error in itself.

Then if you do this publicly you will need to pass your level 97 exams and such. Then you will have to abide by certain SEC rules that govern what you do with your money in your personal life or who you associate with. As an example, a licensed financial planner is not aloud by law to invest in financial opportunities without reporting it to the SEC.

Privately, if you could get a batch of folks who will just sit back and let you do your thing then I say great go for it, but for me it was an ugly experience.

[Stocktrading101]

You can manage money legally by obtaining a simple certification by the SEC and state as a investment advisor. This will allow you to manage someone's portfolio through a broker such as scottrade, etrade, td ameritrade, etc. and legally take a management fee (typically around 1-2%) per year. This is by far the easiest way to actively manage OPM without taking tests and such.

Now, if you want to open a hedge fund, that is a whole different story. I know for a fact that you will have to have your series 7, and along with that tons of capital pre-raised.

The investing business is like any business though, as you have to sell yourself to potential clients. The best way to do this is via a positive track record of a few years that beats out the S&P500 consistently. A model can help prove your abilities consistently, and though they take a few years or more to really get perfected and proven, they can set the tone for many years of successful trading.

Just my 2 cents. Hope that helps.

[JGotti]

thanks.that helped a lot. What software will be needed, if any.

[gijoe9]

Depending on who the people are that want to invest for maybe an investing club might work. I don't know much about them so it may not be right at all but you could look into it. From what I know of them it could limit your exposure to personal risk and give you some practical experience with managing money that is not entirely yours.

[JGotti]

I will managing family member's money. They know the risk that comes with investing. They are new to the whole stock market thing and are starting with a small amount. If they like returns they will add more money as time goes on.