Pooling our research and money

Discussions about Money Management and Risk Control.
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White Cube
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Pooling our research and money

Post by White Cube » Wed Aug 22, 2007 3:30 pm

Starting equity seems a limiting factor in a Very Long Term Trend Following system. It has been suggested to go and look for CTA that offer big portfolio for relatively small accounts. But why not pooling our research and starting equity?

Let’s say for example that 10 forum members join and pool each $ 100,000.00 for a total of $ 1,000,000.00 starting equity. These 10 traders would then research together and develop a common trading strategy on Trading Blox® each sharing the very same parameters ( Portfolio.adm, FuturesInfo.txt…. When every body is satisfied with the testing then we could go live by giving the execution of the trades to a robot broker….

There are probably difficulties in creating and running this pool especially in choosing the legal entity but it would have the benefits of both gathering everyone’s work and money…

Raphael

Jens Albrecht
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Post by Jens Albrecht » Tue Apr 08, 2008 12:38 pm

Just a suggestion: Run the VLTTF system at Finspread or any other Spreadbetter you like. I've had no problems doing this for nearly a year now.

Only difficulty I can think of is the exclusion of US citizens I heard of.

AFJ Garner
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Post by AFJ Garner » Wed Apr 09, 2008 3:34 am

I believe that profits from spreadbetting are tax free for a UK investor, although I may be behind the times?

I am not sure whether a UK investor can trade futures in a tax free retirement account as he can in the US or whether a UK investor can claim he is investing (rather than trading / running a business) and thus benefit from the CGT rate of 18% rather than income tax at the top rate of 40%.

If these options do not apply, then clubbing together and forming a (possibly offshore) fund would bring a significant tax advantage for the UK resident: you roll over your profits tax free and only pay CGT on an eventual sale of units in the fund. Currently at 18%.

When I last looked at the rules, I seem to recall that this works providing each investor owns less than 10% of the fund.

Kobeyashi
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Post by Kobeyashi » Wed Apr 09, 2008 6:15 pm

From what I have read most recently, earnings from spread-betting are still tax free.

DMFord
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Post by DMFord » Thu Apr 10, 2008 3:44 am

Hi,

They are tax free, unless the Revenue considers this is your main source of income - i.e. you are doing it as a job.

Then they will tax it as either Income Tax or Capital Gains Tax - whichevey nets them the most :-)

I don't know of any tax-free wrappers (e.g. ISA/PEP) which allow you to trade US futures within them. You cannot go short, or use ANY leverage, so even CFD's are out. You're left with trading long only on equities (which is investing, which is all they want you to do)

Dave

Kobeyashi
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Post by Kobeyashi » Thu Apr 10, 2008 4:08 am

So in theory, could you get a 10-hour contract to work at minimum wages as a barman, and not pay CGT on spreadbetting? :)

Kobeyashi?

DMFord
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Post by DMFord » Thu Apr 10, 2008 7:31 am

Nope,

As I said, its your MAIN source of income which counts.

Spreadbetting (if successful) would still be your MAIN source of income, so would be treated as a job, and hence taxable.

Dave

AFJ Garner
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Post by AFJ Garner » Fri Apr 11, 2008 10:44 am

Anyone on this board trading futures in the UK who has managed to convince the Revenue to charge them CGT rather than income tax? (on the basis they trade long term and it's really an investment not a business). Anyone managing to trade futures within a tax free retirement account within the UK?

Has anyone set up a structure such as an authorized unit trust to defer tax? Or an offshore fund?

Any other bright ideas?

DMFord
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Post by DMFord » Mon Apr 14, 2008 2:17 am

Hi,

I think if you're trading short term futures contracts with expiry typically a few weeks/months away, it would be VERY hard to convince the revenue that this is investing. Also, you cannot by definition "invest" in rubber, gold, soybeans, oil, IRD's etc. You can only "invest" in company shares - everything else is defined as "speculation".

Perhaps if you set up a company, which runs a "fund", then you invest your own money in the fund - i.e. you passively take no personal money management decisions this could be taken as Capital Gains.

Then could then be employed by your company as a fund manager. The fact that you were an investor in this fund could be entirely co-incidental. If you could persuade a few others to invest a small nominal amount into your fund - then it would all be above board.

This is a direction I've been looking into.

Dave

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