I am frequently asked for advice on taking on investor capital so I wanted to share my experience with you all.

Although I was fortunate to be able to fund my own live account initially with funds I had from a previous eBay business, I did make the decision early in my trading career to take on investor capital. I learnt some key things during this time that I wanted to discuss with those considering making the same decision.

1. The details of the agreement.

The number one thing people ask me is the details of the agreement. This is something to be discussed and agreed upon by the parties concerned, however I personally did not promise a fixed amount. I agreed to split the profits (or losses) proportional to the invested amount as this was something I believed to be fair for both parties. Although this was between myself and someone I was very close to, we put everything in writing and made it a legal agreement.

2. Attracting investors.

I never sought out investors and it was not something I was actively interested in at all. People in my circle saw my results and they approached me. Actions speak louder than words and I would be very careful if anyone on their own journey is actively seeking investors. Convincing someone to invest in you is hugely different than dealing with someone who has already set aside money to invest in some manner.

3. Tax and legalities

If this is something you’re considering doing make sure you seek the advice of an attorney and an accountant who is well versed on the relevant laws in your country. Although it may seem like a simple agreement between friends in some circumstances- don’t be naive. Always make sure everything you’re doing is above board, that all parties are legally protected and that you’re setting up this account in the most tax efficient way. The last thing you want is to be taxed on someone else earnings. Some countries also require licensing to be able to do this so please ensure you’re compliant with all applicable rules.

4. Lastly and most importantly- the emotional consequences.

Remember that trading is about the ability to control you emotions, stick to your strategy and operate solely on the information that presents itself at the time… not a skewed perception of it. This is a challenge in itself when managing your own money and takes time to become comfortable with, but adding the responsibility of managing others money certainly makes your job much tougher. It is something I became comfortable with over time just like we do when managing our own money, but it’s not for the faint hearted. Regardless of how solid your own trading mindset is, when you manage others money you bring their mindset into play as they can question you or add pressure at any moment.

For me personally, this was not a feeling I was comfortable with in the long term as I quit my job to ultimately be completely in control of my own life, time and decisions. Although my investors never did anything to add any pressure whatsoever, the fact is that you have someone to answer to when you put yourself in that situation.

Trading investor capital can be an amazing opportunity in the right circumstances, with the right mindset and the correct legal set up however I wanted to share my personal thoughts to highlight the potential negatives also. All went very well, I was involved with great people and ultimately we were profitable..but emotionally it isn’t something I would recommend if you’re extremely independent like myself. As with anything, do your due diligence and make decisions in accordance with your own values and circumstances as this is simply an account of my experience filtered through my own perception.

My advice: instead of putting effort into attracting investors, use your time to monetise an interest or skill of  your own by providing value to others and use that capital to invest.

In saying that I do speak with many of our students who are doing tremendously trading investor capital – hats off to you all! Remember- there is no right or wrong way…we all have different trading styles, comfort levels and values.

Hope this provides some insight for you all. Happy trading!