How to Achieve 20% ROI this Year
With the recession on the way, savers suffering from ultra low interest rates, of less than 1% p.a, and fund managers all following a passive index strategy ("Because their sheep and sheep get slaughtered" - Gordon Gecko 'Wall Street'), maybe partnering with a professional trader could be a way of gaining an edge in the financial, commodity and alternative markets without having to watch your screen all day?
NB* Only qualified investors have this option available.
The Benefits for the Shareholder:
On the proprietary trading floor senior traders and investors often back Traders and take a share in the profits. The reason for this is that the investor is putting their money to work on an active basis without having to follow the ebb and flow of the market. They don't need to know about trading Government Bonds, Indices, Commodities. They don't need to know about Futures & Options, Butterfly spreads, Outright trades or the influence of the daily economic announcements. They do not need to be in front of their screens from 08:00 – 21:00 hours from Monday and Friday then carrying out research on the Weekend. They do not need to come up with fundamental or technical analysis strategies in which to profit from the Financial, Commodity or Alternative market action. Neither do they need to stress hour by hour as the price fluctuates between profit or loss. All this work and expertise is carried out by the Company.
However, the risk element on an investment with FHI is similar to what traders would term a “Long Call” option. In terms of risk, the purchase of shares is the maximum amount of risk that the Shareholder is carrying, however unlike a Bond the returns to the shareholder are not capped but unlimited.
The Benefit to Trading Firm
The Firm benefits because they have adequate capital to perform it's business model. They allocate capital to a trading account. By having adequate capital they can reduce their risk by not having frequent exposure to the market and therefore taking on too much risk in order to grow their account.
At the same time the percentage and nominal returns make it justifiable for both parties.
Example I Under Capitalised
Account size of £10,000
Return on Month £500 Annual Return £6,000
Percentage Return 5% Annual percentage 60%
Backed Account Partially Capitalised
Account size £100,000
Return on Month £5,000 Annual Return £60,000
Percentage Return 5% Annual Percentage 60%
As you can see in example one, while the return is very good compared to other investments, the nominal return would not cover desk fees and operating costs let alone dividend income. Therefore it's not so much that the trading is not effective but because it's under capitalised.
Example two, is exactly the same return as the first but the nominal amount, this time £5,000, is more meaningful.
When trading the financial markets these types of returns can often be achieved on a WEEKLY basis.