by Gavin M.
So you see the guys on Wall Street with their Ferraris, and their $3000 Armani suits and living the high life with their Yachts and etc. So you want to be like them, right? The path to riches isn't easy unless you marry someone rich. So many analysts, and upcoming graduates from Princeton, Harvard, Yale and etc all apply to work for the top firms on Wall Street.
The financial world is a dog-eat-dog world promising high salaries and a quick rise to the top. This couldn't be further from the truth. With those high salaries and high rises come steep prices to pay - high stress and the chance of getting fired at any second.
Let's take it down a notch and go to fund managing. So you have $5,000 and you're doing very well on your ETRADE account. You brag to your girlfriend or boyfriend and your friends about how cool you are and how you can make something out of nothing. Naturally, as you stroke their fantasies, a few of them will give you a proposal, "can you manage my money if I give it to you?" First of all, if you are not a license fund manager, you are breaking the law if you take this money. While enforcement of such laws is quite laughable, it is still illegal to take someone else's money and trade on it without registering at the SEC as a finance manager. You'll need Series 7, 66, and 63 licenses for that not to mention the recent rules and regulations that govern fund managing.
So, do you still want to manage the funds? If so, let's continue. You will have to re-invent your approach because now, you can not afford to take careless positions on trades using someone else's money. If you're handling a friend's money - you have to live with the fact that your friendship is on the line as well as his/her's hard-earned cash. Let's take a different view. What if it's your cousin's friend's uncle's money? A complete stranger. This is even worse. Imagine for a second, if you lost all of your friend's money, what would you do then? Would you tell him/her you lost it all and it's the nature of the markets?
Here is why: you have to set a legal and binding agreement on how you're going to handle the funds, what rate of return you guarantee on it, your fund management fees, and your reporting schedule. This is not even the most annoying part. You have to also get to know your client - whether the client is a control freak or whether he/she will give you autonomy over the funds. Just because you set a reporting schedule of monthly or quarterly, it doesn't prevent your client from asking you about the performance status or even a request to redeem the funds.
Do you see what I just explained to you above? Fund managers have a lot of stress and legal liabilities to set. I fully agree with the fact that they are getting paid a lot because their stress levels are high and the pressure to perform well is very high. Of course, there are always those managers who are too excessive in flaunting their success but that is beside my point. I have a lot of respect to my former colleagues who are still in the business. They have more gray hair than me but such is the nature of the business. Being a fund manager is not as easy as you pictured it to be. It involves lots of sleepless nights, and a lot of work hours. This is the very reason why they let the stress out by buying Bugattis, buying Yachts and whatever they can splurge their cash on to release all the tension and relax.
Most fund managers that I used to work with, stayed in the business to make their number and then they go off to manage their own money. When you're dealing with millionaires, and billionaires these are the most difficult individuals to deal with. They surround you with their OCD and continue to harass you for status reports on their money. After all, their justification is, "it's my money and I should always have a final say." If you are the type of person who loves the high stress, and the high life then this career path is for you. If you love being abused by rich people, then this life is definitely for you.
I for sure knew it wasn't for me. I went in there, made my money and then got out. I manage my own money and it's the best feeling in the world. Knowing that no one calls me at 3 in the morning asking if I'm in the crude oil rally or at 10 at night asking if I'm shorting the Yen it makes me very happy that I am my own boss and what I do with my money is my own damn business only. Inherently, humans hate authority. Perhaps that's what I have but I definitely do not want the pressure of managing someone else's money on me. Sleep is important to me. My entire mental health is important. I now work a total of 20 hours a week maybe even less. It's a big change my former 80 hour weeks and I couldn't be any happier.
Find your path, and never be afraid to correct it when it doesn't fit your goals any more.
Traders from Equity Sense will be writing on this blog on positions and other market-related things.