Is it possible to start an FX hedge fund?
I am not sure if 'hedge fund' is the correct term. Think of Buffett. He owns shares in a bunch of companies and Berkshire Hathaway is the umbrella holding company for them. I guess it's more of an asset management company than a hedge fun.
My point is, you have a bunch of personal trading accounts that deal in FX (Or maybe other markets as well). Then you register as an entity (like Buffet did with Berkshire Hathaway) and sell shares of your company.. For example, if your total assets are 10K, you own 10K shares each valued at $1.00. If that account grows to 100K, each share is now $10. So, let's say when the account is still 10K, you offer to sell each share at $10 (because of the money making potential of your company) and manage to sell 1000 shares and recuperate your initial 10K that way. Now you have 9K worth of shares and your investors have 1K worth of shares. When you reach 100K in assets, you have 90K and your investors' shares have paid them handsomely too.
Question is, is it possible to do something like this? What is the proper term for this?
If Buffett could do it, why can't others? I do understand that he owned physical assets worth buying shares in but if at end of the year, both Buffetts and your efforts have paid off the same, than it should all be good. Right?
lil bit motivation
I used to trade the pink sheets which he warns against doing and he is right cause they are the sh'ts.
Ya, it was informative. thanks.
A buddy PM'd me about PAM's or PAMMs. I responded that they are basically run by brokers or 3rd party middle man entities who choose you according to their standards and put major limits on your performance. They do have positive advantages like they have streamlined the process and you don't have to deal with complaining cranky investors directly and don't have to chase them for payment etc. etc. and he is right about that.
It's just that you hear about hedge fund managers like that guy on TV. Mooch or Scaramucci who sold his hedge fund for 400 mils just to be able to suck on Trump's small toe for 11 days. I don't think I could sell my PAMM account or anything at all. How can a hedge fund manager sell his hedge fund? I am guessing he sold the subscriber accounts to his hedge fund so the new owner then can get his own traders to manage the X amount of billions under management. That's the kind of authority that makes you an owner. The PAMM thing probably has clauses in it that are pretty restrictive cause they don't want you to sell out their clients. After all, they are not really your clients and for all practical purposes, you have no access to them.Anyhow, the more independence from the middle man, the better.
PS: I am not trying to recruit any FF member into becoming a client of mine or anything like that. I am interested in the big picture of if a fund like Buffet's is possible to set up in FX. It could be set up by anyone and any clients. Not after FF members..just wondering how the big boys do this sorta thing.
Interesting topic. Hopefully we get some input from more experienced members...
It's not worth it anymore. Too much work, too much risk and low returns in the end.
Look, Forex is a dying market without future. Also the whole world financial system based on fiat money and central banking is near the end of the cycle.
The system is not working anymore and eventually (soon) will have to be replaced with new system. But this is not new event because historically it happens every 50 years or so..... or at least once for every generation every century. You can even read about this problem in the Bible and other ancient books from thousands of years ago.
Somehow they have to reset the huge debts you know....to clean up the systemic errors accumulated in the system. Just like you have to restart you PC from time to time because it's not working smoothly due to errors. And every few years you have to buy new PC because the old is obsolete and too slow. The system wears out. All systems wear out eventually. It does not matter if its a real machine or something virtual.
The current international monetary system was implemented around 1970 and it replaced the previous monetary system which was active from 1913 to 1970. And before that there was another system....and so on all the way back to the ancient world of Egypt, Rome and Babylon.
If you want to make money buy stocks, Invest in gold other precious metals, energy and technology in general. Forex is a dead end.
I'm not up on the international monetary system history but it was never abandoned and nullified. They just updated it to match the demands and trends of the time. The only threat to fiat money that I know is cryotos and we know what a shamble they are. I haven't heard any hints from the powers in charge that they are going to abolish the fiat money system. Maybe one day but it won't be any time soon.
It wasn't that long ago that many governments dumped all their gold reserves because gold wasn't really relevant any more and now gold is a sweetheart again? Buffet ridicules gold. It is at the same price that it was in 2013 and that is thanks to recent rise. So, investing in it not such a good idea. Maybe trading it is better but then why not trade currencies then? Stock market is corrupt to the eyeballs. So many little hustlers F'ing with all sorts of stocks. I might as well go get a good broker and give up trading because brokers are agents of insider trading. They know what the companies are doing and they know clients with deep pockets and they are the middle men.
Anyhoo, it's not like I am jumping in today with my big famous well connected currency fund any time soon. Basically, if it was something that was doable, it would already exist because there is a glut of money sitting around hoping someone raises it by 2% a year and no one is doing it in a central organized manner. We have just a few rag tag brokers or sites making little connections between small time traders with no funds of their own and a bunch of investors with $1000 accounts hoping to become millionaires. Just like how coffee shops ran before Starbucks. Then Starbucks came and put their name brand on it exactly when there was a huge backlash about caffeine. Coffee was a bad thing in the late 80's for a while. At the same time muffins had the reputation of being a healthy choice. IDK if anyone remembers this stuff. Same with caffeinated sodas. Then a new kid arrived called JOLT with extra sugar and caffeine. They marketed themselves to people who needed to stay awake and party or work. Soon after the copycats arrived and a whole new industry of energy drinks started.
Anyways, alphaomega, I have read your posts here and there and you are always super negative about FX. Your points are noted but also I know they come from someone who is pretty much anti FX. Thanks all the same.
So in short, there is no edge in this market. You may as well bet your money on the horses. The odds are the same.
But you kinda told me to pack up and go buy some metals instead. Dreams dashed now and therefore I think you are kind of up there in the negative end of the things.
Forex is mostly random now.
The interest rates are virtually 0
the robots are taking over the market
Human traders are minority already.
the market does not respect the fundamentals.
The reactions to the news are random.
Those all sound like edges to me.
No disrespect to human traders. They can be around and trading all they want.
Ya I don't like the regulators like probably most but maybe they are kinda keeping the industry cleaner than would have been otherwise.
I'm adding 'start an FX hedge fund' to this list.
The #1 on the list just got knocked down to #2.
I don't know how Elon Musk gets sh't done.
I did same thing he did and dropped out of university but it didn't work out the same way for me!
Just a few words from a buddy who PM'd me regarding this topic (with permission of course):
i know that the "fiat" currencies are still here, and i know that crypto may be an effort to lead ppl to believe it is the next new thing, but bitcoin and the other 3000 others failed to convince me so far.
anyone would explain if all is mining for the remaining little bitcoin, then what the energy consumption will spike too?
and what happens when all is mined?
since another 1000s of crypto were created, wouldnt one just create a new?
why would ppl still be interested to facilitate the bitcoin transactions/solving complications IF all bitcoin mined?
the forex volatility is low, but for example, yesterday was a day when things jumped, and suddenly many pairs had normal or higher ranges again. such keep occurring regularly.
as you pointed out, the banks pay zero interest.
ppl like to overlook, but overall, stock investment is hardly that profitable to the masses neither.
nor bonds, etc.
in fact, most, me included, would be happy to have a 10% return a year with the current 1-2% interest and relatively low inflation numbers.
but for some reason, and most ppl involved, and forex especially, ppl want to chase unrealistic expectations.
take that 10% a year....would break down to only about 0.8% a month....with 20 trading days, it would be only about 0.04% a day!!!
but you regularly find that ppl are told to risk 1-2-5% a trade!!!
to give things a little perspective, on 10000$ acct, taking 0.05 lot entry, it is only 8 pips! to get 0.04% return!!!...only 4$ a day to get the 0.08% a month on 10k!!!
would be easy enough to scale in and out some swing trades with a few small positions, and never even come close to 100$ drawdown ( that is 1%, the conservative suggestion on risk per trade on forex books and courses and infinitum regurgitated forum smartness).
i believe it all comes down to desperation and undercapitalization.
that leads to unrealistic expectations.
that leads to rushing things, risking way too much, and then in the process blowing up that little capital that most often would be equal to a modest Sunday family dinner in a restaurant...ffs, 4 meals in a McDonalds with an icecream each in the end, and you are about @50$ already!!
in turn, these punters call themselves traders, and when fail on their journey 50-to-million, then they bitterly crying around that forex is no good.
sure, forex, like any other things has good and bad.
but dont for a moment think that government bonds exist bcos your government want to make you rich.
or banks sell ETFs bcos want to make you money.
or even stocks are being sold for that...stocks are sold so you shoulder the business risk in HOPE they will make it....just like lottery you buy in HOPE you win the jackpot. ( which rarely happens).
some early crypto fan may still exist who bought 5 bitcoins for 10$ as a funky joke, and forgot about it, and one day said wow, now it worth 50-100k, sell, and look how much i made...just like some exist who saved a mint condition baseball card and find that today it worth 100k...
but would any baseball card you buy today worth anything 10-20-50 years later? no one can tell.
electric cars a hype now. everywhere pushed the agenda, strongly, often with subsidies.
but stop for a moment, and think, if the whole world has sub 1% electric cars, would we move to say even 50%, what would be the effect on the litium available? would it be enough? how much would it cost then to make batteries, replace batteries?
would it be still same feasible?
where would the increased electricity need come from? without coal, oil, atomic? if suddenly 50% of the total estimated 1 billion vehicles would be electric and need regular charging?
but one cant sell hype pointing this out.
imagine if the 7 billion ppl all using crypto, and no fiat money...but the same time, this hype of crypto low and behold, makes millions and millions of fiat $$$ tothe exchanges, who charge very very heavy fees for changing to crypto...or withdrawing back.
so, i think forex is still well.
once the expectations are sorted out, and most importantly have proper funding ( the main retail killer), it is all fine.
hype away, no one will think to put 50$ to crypto now to get to million, nor to bank deposit, nor to stocks, gold, whatever.
begs the question, why think in forex it should work that way?
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