Is selling advice better than running money?

G

garfangle

I have wondered why so many investment professionals would rather sell their advice than run money. Why would they peddle their newsletter tips for only $50/mo instead of managing a $100M fund? Wouldn't you rather be a Wall street big shot than a retail peddler?

I think it is v. simple economics. Running a fund requires hiring expensive help (analysts/traders/legal) while the overhead for publishing and marketing a newsletter may be much less (cold caller/household lists/direct marketing service). Building a fund requires convincing wealthy individuals or institutions, while marketing a newsletter uses mail/advertising to generate volume.

The rewards can be better. If you manage a $100M fund you'll gross about $1.5M in annual fees and possibly also get performance fees as well (though not if you are organized as a mutual fund). If you can get just 5000 subscribers for $50/mo. or $600/yr. for your newsletter you'll gross $3M. Although you may not be able to get performance fees, if you do well you'll attract more subscribers. If you are managing money getting more money may be counterproductive to your future performance, not to mention a headache as to where to put it all. A newsletter does not have to worry about how a subscriber's places his own money.

So, if you are a great trader, don't try to start a hedge fund, start your own newsletter and let it ride :D
 
You can't buy the breakout of the previous bar after the 3ema crosses the 13ema on the 3 min chart with 150 million dollars as easily as you can sell the same idea to 5000 people for 100 bucks a pop.
 
Quote from inandlong:

You can't buy the breakout of the previous bar after the 3ema crosses the 13ema on the 3 min chart with 150 million dollars as easily as you can sell the same idea to 5000 people for 100 bucks a pop.
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This gets my vote for ***BEST*** post of 2003.

Hands down.

You hit it right on the head, IAL.

-b
 
one could also say that the whole industry based on trading (broker, analysts, advisors etc...) is based on the nourrished illusion that everybody can make money trading working 1 hour per day, while they make most of their money on their back.

I also strongly thing the huge rate of failure for private traders is a big source of revenue for broker (more than if traders were making money )
 
Garf, information sellers & hedge fund managers have two totally different client bases.

Hedge fund managers sell their services to accredited investors who have already managed to get rich, while information/advice/amazing money-making system sellers generally pander to inexperienced, underfunded wannabes.

One group of clients wants a solid investment, the other wants a dream.
 
Quote from Rearden Metal:

Hedge fund managers sell their services to accredited investors who have already managed to get rich, while information/advice/amazing money-making system sellers generally pander to inexperienced, underfunded wannabes.

One group of clients wants a solid investment, the other wants a dream.
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Well said.
 
Quote from Rearden Metal:

Garf, information sellers & hedge fund managers have two totally different client bases.

Hedge fund managers sell their services to accredited investors who have already managed to get rich, while information/advice/amazing money-making system sellers generally pander to inexperienced, underfunded wannabes.

One group of clients wants a solid investment, the other wants a dream.
More...

It's not a matter of cliente, but what gets you the most bang for the buck. Why do you think investment pros subscribe to institutional research?
 
And for getting 5000 subscribers you have just to get several millions of prospects since the rate conversion order is very low 1/1000 to 1/10000 (3/1000 is a usual rate conversion for normal products for example) and that has a cost of time and money if you are a newcomer in the business :). It will become more a marketing job than a trader's job. And if you are really serious you will have to support them especially since they are novices and so have employees that have a huge cost also. As for myself I decided not to do that (in fact my site doesn't accept members any more). It is preferable to address only professionals but then your product must be very good and you must have already cope with them. Since I have already given advices to traders of a big bank I know their need and it is less a headache to deal with professionals that don't need support than to deal with more novice public and so the human and marketing cost is far reduced.

Quote from garfangle:

f you can get just 5000 subscribers
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Well the question is then..has anybody ever come across any newsletter service that is actually making picks that are working on a 50% scale with proper stops employed?
In other words has anybody seen a newsletter that they can honestly say now this person TRADES! As a matter of fact they are damn good at it and they must be using this newsletter to make even more money! I just see so many skeptics here and whenever the idea of newsletter jumps up to the front it always gets knocked back with snake oil salesman comments.
So once again has anybody ever seen or used a newsletter that was really something to behold and you knew it was a true trader making the calls with success?
 
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