I frequently meet people with really compelling investment strategies and ideas. Hey, can you help me raise some money? They're looking for help putting together a fund to demonstrate exactly how good their strategy or stock picking really is.
Starting a fund is hard...and expensiveIt's not that I can't really help them -- it's that starting a hedge fund or mutual fund is pretty complicated and expensive. You need to see significant growth in assets to be able to scale these things to profitability (once they achieve that, though, they're pretty damn profitable). Like any startup, the chances of these startup funds achieving escape velocity -- getting enough traction to turn their good ideas into profitable ones -- is pretty slim. But, there are other ways of putting your investing talent to work and make money while doing it -- all without the headache and onerous infrastructure needed to manage a fund or a regulated investment advisory.
How to make money from your investment ideas (without starting a fund or having $$)Here are 5 ways to get started selling your portfolio strategies:
- Collective2 is a marketplace of investment strategies. Portfolio managers can either manually input changes to their model portfolios or auto-trade them by connecting a trading account to the site's platform. Portfolio managers set the price they charge for a subscription to their model (could be $/month, only if profitable, etc.). Billing, reporting, etc happens all through the site. There's a listing fee to list a portfolio and the ability to advertise your system on the C2 website. Listen to my interview with Collective2 founder, Matthew Klein.
- Zignals: Zignals is very similar to Collective2 but if Collective2 has the user interface of Craigslist, Zignals is more like Microsoft. And that's partly because Zignals is built on MSFT's Silverlight technology. The sleek site has a lot more tools for designing portfolio: charts, alerts, screeners, etc.
- Covestor: Collective2/Zignals are really trading in data (though users can hook this data up to autotrade the strategies they follow). Covestor is a marketplace of managed portfolios. Covestor users actually open up brokerage accounts with Covestor and deploy actual money into the portfolios they track. Covestor handles investor communications and portfolio managers supply their ideas/trades to Covestor. It's a way to get into professional asset management without the headache of getting licensed and managing real clients.
- Currensee and etoro: These next generation forex trading sites both allow talented traders to open up their activity to others to follow. In return, they make money by doing this. If you have a good track record, you can make some serious change as you can also profit as part of a carry -- if you're profitable in your trading strategies, you can make a percentage of the money you make your followers.