Should I consider a prop firm? Or just trade my own funds? ($2 mil)

Should I join a prop firm, or just trade my own funds?

  • Prop firm

    Votes: 2 5.7%

  • Trade own funds

    Votes: 33 94.3%
  • Total voters
    35
@Serenity

investing 75% of net worth into "unlisted property funds" requires a great deal of conviction

what are the risks involved for this investment?
what makes you feels safe and "conservative"?
is it fine to assume we can withdraw a fixed percentage every year?
should we have some back up plan in case of changed market conditions?

thanks for sharing different perspective.. :]


====================


@SpreadOption

i understand you are unhappy with your job
but family happiness should be first priority, no?
after all, you are responsible for their futures and well-being

you can keep your job for a more while until you figure out how replace that source of income
it can be a new job, new entrepreneurial pursuit, new business investment or new proven trading systems

if you do have a passion in trading, you can spend more spare hours to learn and develop new trading skills
or take a weekend class / regular training in reputable education firms

basically, do everything you can to work your way out of cage
inheritance is just a small advantage, don't be spoiled by it..

good luck :]
 
water7 said:
if you do have a passion in trading, you can spend more spare hours to learn and develop new trading skills
or take a weekend class / regular training in reputable education firms
More...

Do you have any recommendations?

And yes, I'm not going to quit my job until I have a sensible plan that I'm confident will work.
 
Study Warren Buffett. Look at the ways he makes money from selling insurance. Replicate in a margin account using public options markets to sell insurance while being long dividend paying stocks. You can make about 200% on the margin used.

 
luisHK said:
Not sure what pigeon brains have to do with HK, the IQ stats definetely don't support the idea of a dumb population, but I might have missed your point.
More...

He was referring to the local menu. Chickens feet for breakfast and pigeons brain for lunch. And for Westerners, you can find pancakes only for dinner.

I don't know why people think trying to live frugally is such a painful process. You can think of it like a game which requires great thought and creative ideas to get around paying huge amounts of income and consumption taxes. Think of it like reducing your carbon footprint.
If nothing else, it broadens the realm of possibilities and provides a good backdrop if you fail and find yourself broke. My richest friends make it a game to try to do everything for free.
It's hard! Meanwhile your savings grow and the miserable rates continue to compound.
But that's half the game, the rest of the time is spent finding new revenue sources.

I would suggest diversifying your assets so that the volatility of returns comes down and the predictability of the outcome improves.
Why not look at Bonds on companies that provide yields over 10% and be prepared to become an equity owner if the company files for bankruptcy ?
What about spending a part of your time looking at distressed assets or companies and making an investment where you are convinced that there is a high probability of turning the business around over a few years? You are buying low at a time when everyone else is selling. But you need to understand the business and the business cycle and have confidence they can survive.

But don't give your money to someone else to try to trade these markets. They will never be as careful with your money as you will be. Why would you want to pay for their Bentley?
 
just21 said:
Study Warren Buffett. Look at the ways he makes money from selling insurance. Replicate in a margin account using public options markets to sell insurance while being long dividend paying stocks. You can make about 200% on the margin used.

More...
Warren would never trade on margin. Even when he sold naked puts on the stock market in 2008, the agreement with Goldman Sachs was that they could never make a margin call.
His biggest concern was that he wanted to wait till he was right and didn't want anyone else to tell him that he had to sell for a loss. If your time horizon is forever, then even a broken clock is right twice a day. Warren sold premium when volatilities were at historic highs not at today's Historic lows. Selling premium on margin is fools gold! What he does do, is invest forever in businesses where he can control the management team and the capital expenditures. He plows the profits back into the business to minimise the tax rate and maximise return on capital.
Where the business goes horribly wrong, he will join the board and personally get involved in cleaning up the business and focusing the resources to maximise returns.

If you translate this, it means to find a business that you understand and can get personally involved in. Buy a decent piece of equity in the business, so that you have some influence over the outcome and make sure that it generates good returns. This could be a business that could take the place of your current full-time job that you don't like.
But like other people have suggested, once you know that you can survive with out your full-time job, it changes the way you work and interact with Other people. You may not like your job today but you might like approaching it from a different perspective where you don't have to take other peoples crap and you let them know it. You just might like that new approach! I did.
 
One downside of a (good) prop firm is the registration. You have to pass the test which isnt too bad, but you have to get fingerprinted. Yes an invasion of privacy, but required to be in the game. Otherwise I have been very happy as a prop trader. Better execution, plenty of leverage, and a risk department that is on my side.
 
Congrats on your work so far and good fortune with the inheritance.

Let me offer my journey to the exit. I had a similarly uplifting job and one particular event set me hard on the journey to seek full freedom. I had casually traded for a good number of years primarily using trend following, some of Larry Williams stuff and then some system ideas I developed independently in AMIbroker ... in that order. I briefly flirted with looking at the prop world as a 'career change', but the white shoe boys were a turn off (maybe just my bad sample), and it was exceptionally clear to me that my background/personality would not fit in to that clique. Ahh ... I wasn't going to TRY to fit into that clique. Since I wasn't devoid of trading capital, I decided just concentrate on growing it my way.

With a thick skin and good ability to filter distractions, your results may be better.

For a couple years I cranked it up and made more than my well paying engineering/biz mgmt day job, but it was fairly exhausting to say the least. The money was positive, but I learned several new things about how taxes can become suboptimal. Heavier trading was very interesting for a while, but I found that the energy/time required to do it right was really less rewarding (personally) than another tech/biz project that presented itself ... and sometimes my gift of dyslexia did make charting less than fun. (Fortunately, MS Excel was invented early in my career, otherwise I would have been completely unemployable.) A little further down the road, I too was fortunate to inherit a much smaller amount, but that and the combined work/trading net allowed me to see the light at the end of the tunnel.

After careful cash flow planning and building in a little margin for error, I ended up moving away from trading heavily (90/10) to the inverse of that ... mostly investing in heavy distribution paying 'necessity' companies (example: E&P, midstream, pipelines, closed end funds of MLPs in the energy biz - my original field). I concentrated over longer time frames combining a little DCF analysis of projected distributions plus shareholder equity to crudely search out fundamentally undervalued equities and then used technical analysis to find relatively decent entries. Simple trailing stops triggered harvest-redeploy cycle. Very trivial compared to what I was doing, but dead dumb simple that works is ok by me since I got my time back.

In 08-09 I was fortunate to load up heavily using this simple income/growth strategy and was pleasantly surprised with the results over the next 5-6 years given the nano-time it took to simply get in and monitor compared to what I put in before. That run enabled my final break comfortably.

I can't recommend enough to spend a sufficient amount of time thinking about "(1) Just how much is enough, (2) how do I optimize taxes and (3) what did I really want/need personally?"

We flipped to the ex-urban lifestyle swapping a 1/4 acre high tax county for a smaller retreat in the middle of 40 acres free from psycho-subdivision birdbath color regulation enforcers and are terrifically happy with the results ... far lower taxes/expenses, growing healthy organics, berries, grapes, even lemons/tropicals. Good exercise/tastes great. Neighbors are exactly what I want. In fact, the biggest surprise was the number of execs, military and LEOs that where retiring in this county (Two hours drive in three directions to the nearest SMSA). A good friend, RE agent, and I were having lunch last month and he told me he had just completed a year and a half deal moving 26 law enforcement officers' families into ours and an adjacent county. All moving in from southern FL at one time. One or two maybe, but 26? Blew my mind. Lot's of things drove me out of the dazzling urbanite lifestyle, but this gave me even further pause about just where our country is headed. Take the ZeroHedge red pill.

Everything revolves around what you can imagine about what really is important to you. I am very glad I planned extensively, especially about the destination and its characteristics. Go, see, stay and do before you pull the trigger.

Plan/research well and the results will likely favor you.

Hope that helps!
Good luck!
T200
 
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