What is the best way to trade friend's money ?

I have some follow up questions - do I have to be certified Financial Advisor or Financial Investor to able to trade friend's money ? or a Limit Power of Attorney to my friend's account is good enough to trade his/her money ?

Any one has any thoughts or links to how the taxes work in such cases ?

Thank you for your help in advance! :)
 
If you're going to get involved in something like this (I strongly recommend against it, FYI), then the only thing I would consider is if you matched funds with him vs. using only his money. That way you would have something to lose as well.

And, the advice about making sure everything is in writing is excellent advice.

Pay yourself a 10% bonus from his profits only if you make money of course.

You still risk your friendship, but probably not a lawsuit.

FWIW,

Don
 
Quote from ASTrader:

I have a very good stock market options trading system! My friends want me to trade their money using my trading system!

What are different ways to do it ? What are possible tax complications ?

Thank you for your help! :D
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You think trading is stressful now? (If you don't, you haven't been trading long!)

Just wait until you start trading for your friends. Hard enough for clients, with a business-only relationship. But brutal with friends.

Don't do it. Very bad idea. All downside.
 
Quote from ASTrader:

I have a very good stock market options trading system! My friends want me to trade their money using my trading system!

What are different ways to do it ? What are possible tax complications ?

Thank you for your help! :D
More...

The Cardinal Rule:


Always have the check made out to cash.
 
Quote from Jachyra:

Trading a friend's account is almost always a losing proposition because you typically have nothing to gain. If you do well, you're usually not taking a big enough cut (because they're friends and you're doing them a favor) to offset the risk of doing poorly and ruining your friendship.
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Exactly right. that was my experience. Unlimited risk of hard feelings, limited potential to make money. So I asked him to close his account.

In case you want to do it (but dont), I used an IB adviser account, which worked very well for it technically.
 
Quote from ASTrader:

I have some follow up questions - do I have to be certified Financial Advisor or Financial Investor to able to trade friend's money ? or a Limit Power of Attorney to my friend's account is good enough to trade his/her money ?

Any one has any thoughts or links to how the taxes work in such cases ?
More...

I already posted that the tax liability is that of the friend if the account is set up in his name. You can trade his/her money if they sign a Limited Trading Authorization.

With MB Trading I do trade a friend's money. Since I'm not a Investment Advisor or Pension Fund I was told I can't receive compensation from the friend I trade for. But compensation wasn't why I am trading his money. In some ways it's helped me to further improve my own trading.

Posted this morning:

http://www.elitetrader.com/vb/showthread.php?s=&postid=1734424#post1734424
 
Quote from Don Bright:

If you're going to get involved in something like this (I strongly recommend against it, FYI), then the only thing I would consider is if you matched funds with him vs. using only his money. That way you would have something to lose as well.
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That's exactly what I do. So as to not create additional work for me I merely make the same trades in his account as in mine, scaled to the respective capital in each account. My friend thought that was a great idea as if I make money he makes money and vice versa.
 
Lots of negativity here about trading funds for friends/family, I'm in the other camp as I think trading other people's money is a great idea!

The way I look at it is if you have a consistently profitable strategy and trade it anyway then it's not a lot of extra work to trade sub accounts at the same time. If you're any good then in time the word spreads and the fund grows, along with your commissions every month.

Sounds like free money to me!

On the other hand if you're not that good at trading and tend to blow out accounts every now and then it's probably not a very good idea, losing a friend's or a family member's hard-earned cash can leave you lonely next Christmas, they kind of take it personally!
 
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