The Transition

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The Transition

Josh’s strategy has been clear from the start – and, with a slight ‘jump’ in Net Worth recently, due to a positive outcome on a trade (a.k.a. bet) and a stake in a pharmaceutical company, he should soon have the capital to do what he wants to do: start a hedge fund of his own. Anybody ready to throw their money in the ring, yet (7MITs aside, due to the 7 Golden Rules)? If so, why? If not, why not?


At this point in our journey, it seems appropriate to graduate from the foundational principles of Money Making 101 and to immediately enroll in Money Making 201 activities. Similar to sequential classes in school, 201 principles are well rooted in 101 principles, so a strong foundation in Money Making 101 is imperative.

The most important principle I’ve taken away from Money Making 101 is to keep my finances as simple as possible. I’ve determined to use only one credit card, and only for purchases related to my automobile, such as gas, parts and service (I just can’t pass up the 5% cash rebate). All other purchases are to be made with cash or debit card. Another financial amendment starting in June will be automatic deductions from my checking to my brokerage account, this will be the second most important deduction after my tithe.

Speaking of tithing, I experienced a slight increase in my net worth this past month, it currently stands at approximately $450,000.  Obviously this has caused my required compounding growth rate to decrease, but after  exploring the housing options in Westchester County recently, I’ve increased my number to slightly under 9 Mil, leaving my required compounding growth rate around 53% (I guess this is an improvement from 170% not too long ago).  My date remains unchanged at 6 years, 6 months from now.

To achieve 50+% compounded annual growth, I plan to start a hedge fund, possibly within the next year. Once the fund is established, I will consider myself partially retired because trading doesn’t demand much of anything I wouldn’t or couldn’t do if I didn’t have to work at all. As long as I have a computer, internet connection and phone, I could trade from anywhere, and frankly, the strategy I use doesn’t demand much research time. The assets I’m invested in currently have very little risk while potential future increase is large. I expect the managing executives of the company Titan Pharmaceuticals (the company I own a small stake in) to do as they recently described as “maximize the value of our current assets… for our shareholders while minimizing expenses”. The only viable option I see is for the company to be sold to the highest bidder and when the avenue for egress has been offered, I will sell my shares and start the hedge fund.

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Reader Comments

@ Josh – You are in a great position and I’m really glad to see you doing so well, you deserve it.

As for putting money in your hedge fund, I would highly consider it (if I were allowed to) based on you having similar interests and goals to my own, your passion for what you do, and your tithing.

Practically speaking, I would like to see a longer track record for your investments (and maybe excluding any MAJOR outliers!) and would like to better understand your strategy.

But I have a really good gut feeling about your success and would probably be tempted to invest a small percentage of my portfolio with you.

@ Josh – Two approaches:

a) Trade your way to a fortune – use your own money and trade it to a large number

b) Start a hedge fund – trade other people’s money (collect 2% of funds under management + 25% of profits: yum!)

… both are risky in that they rely on you being successful, and (b) ALSO requires a track record: here’s how to start ‘proving’ that your system ‘works’:

Ryan, thanks for the vote of confidence man.

Adrian, Those are the two options. Option (a) is more attractive to me because I don’t have to be bothered with other people, although their money would magnify earnings.
I’ll check out collective2 tomorrow.

@ Josh – In that case, I think you are “trading” rather than “starting a hedge fund” … but, to keep your options open, collective2 MAY provide you a way to start tracking your trading success in case you change your mind about starting that sweet, lucrative little hedge fund 😉