7 questions to ask any money manager

We spend much of our adult lives earning a living.
After taxes, housing cost, transportation costs and
other expenses, we have a little left over to put into
savings. That money in savings will have as much
impact on your quality of life in your later years as
your health. Yes people will make great efforts to maintain
or increase their health, but will hand over their life
savings to a faceless entity for management. The person
who helps you manage your finances should be as
carefully selected as your doctor or lawyer. This person
will have a great deal of influence over your investment
future. This relationship must be built on trust, experience
and respect. It continually boggles my mind how little
effort investors put into a decision that can affect their
lives so deeply.

There are 7 questions you should have answered to your
satisfaction before anyone gains the privilege of managing
your assets.

1. How do you control risk in each position?

Risk Control is the number one factor in consistent
performance. Before any investment is made, a competent
money manager will have already considered the downside
potential and will have created an exit plan in case the
investment goes sour. In a market that has produced 50%,
70% and even 90% losses, controlling the damage from
your losers is the only way to keep your head above water.
NEVER should an investor take a 50% loss on their money.
Having a proper risk control plan in place will ensure that
the currency pair is sold or hedged before the damage can
reach these disastrous levels. Another important question,
is risk consistent across all the open positions? It is vital for
a trader to keep losses and gains in context. It is a recipe
for disaster to lose $3,000 on one trade and make $1,000
on another. Losses are part of this business, the question is
not will they occur, but how will these losses be offset by
gains in the portfolio. You want a money manager to be able
to tell you how they choose to balance your risk across all
open positions. The main way FMA LP does this is by having
only one position open at a time, not including the possibility
of hedging that position which does not take up additional
margin. If a hedge is not put in placed then a stop loss is,
there is always one or the other.


2. How do you convert paper profits into real gains?

How many times have you seen an investment rally to
provide you with a large paper profit, then collapse rapidly
as you watch your paper profits vanish? The market cycles
constantly between overbought and oversold, undervalued
and overvalued, cheap and dear. As a rally creates profits
for you, creates profits for many other market participants.
When they believe the currency pair is fully valued, they
will begin to take their profits. In many cases, this selling
pressure may be more than the currency pair can bear. The
only way your gains more than offset your losses is if you
convert paper profits into money in the account. Just as a
money manager must have a plan in place in case the
investment slips, so to should they have a plan in effect for
a successful outcome. An appropriate price target should
be set, and when the price reaches this level profits should
be realized. To a competent money manager, the questions
above should be easily answered. These are questions
about their core skill set, and would be similar to asking a
chef how he/she prepares a favorite dish. While you may
not understand the minutia of their trading plan, you should
be able to get a sense of their mastery on the subject. To
a successful manager, a trading plan is the nearest and
dearest thing to their heart. Discussing its philosophy and
fundamental construction should not be an uncomfortable issue.

3. What was the average draw down experienced before
account equity made new highs?

Return is always a factor of risk assumed. The more risk
you assume, the higher your returns will be if you're successful,
and the higher your losses will be if unsuccessful. Looking at
the draw downs or losing streaks a money manager has
experienced in the past will allow you to gain insight into how
much risk this manager takes. If you deposit $100,000, and
your account grows to $200,000 at the end of the year that is
all well and good. But what if during that year your account
fell to $50,000? Some managers take excessive risk in order
to be able to post big numbers when they do well. Your money
deserves better, so look for a manager who has draw downs
small and control during his/her career. Consistency breeds
consistency, and good trading is very boring so seek out a
person with a "slow and steady wins the race" management s
tyle. When you examine FMA LP's track record you will see that
low draw downs is one of the highlights.

4. Are you performance compensated?

Like a lawyer working on contingency, you want your money
manager to have a vested interest in your money's growth. If
your manager works directly for you, then this question is easily
answered. If he/she works for a firm, find out if their compensation
(bonus) is based on client account performance, and NOT money
under management or new accounts opened! You want to be
working for someone with a personal investment in your success.
A flat management fee may seem cheaper in the beginning, but in
the end your returns will likely be better if there is a profit incentive
for the manager. That is why FMA LP charges a 35% monthly
performance fee for the Regular Account and a 50% performance
fee for the Gaius Account. The Gaius Account is currently not
accepting new clients.

5. How do you feel about being entirely in cash?

A wise trader once said... "There is a time to be bullish, a time
to be bearish, and a time to be fishing!" A good money manager
will understand the power of nonparticipation, and will be willing
to stand aside when the market offers little opportunity. Think
how dramatically a money manager would have outperformed
the majority of mutual funds by simply remaining in cash for the
majority of 2002! Look for a money manager who has the guts to
be flat when it's appropriate. This last question must be repeated
many times to new clients because if you become a client of FMA
LP you will see days on end with no trades. If you are an immature
trader you will think that a lot of good trades have been missed.
What you might see as "good trades" we usually see as noise and
low potbellies. That is why we ask for a 9 month commitment, but
there is no penalty to add or with draw funds at anytime.

6. Does the money manager personally take your money?

This should only be done by hedge funds, not futures or forex
money managers. If a forex trader ever ask you to fund to their
company run the other way. It is illegal for traders to take funds
in their own name. That in the purpose of clearing with a registered
FCM (Futures Commissions Merchant). Clients and FMA LP simply
sign a limited power of attorney that allows us to trade the account.
The account is then linked into the master account with all the
other clients.

7. How much is the minimum investment?

Good money manager's can command any minimum. Once that is
achieved the minimum will go up dramatically.

Make the effort to have these seven questions answered to your
satisfaction. By covering these issues up front, you will have
dramatically increased your chances for a positive and profitable
relationship with those whom you entrust with your money. Please
read the CFTC read disclosure and opt in to access our trade report.



U.S. Government Required Disclosure - Commodity Futures Trading Commission. Forex, Futures and options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on the website. The past performance of any trading system or methodology is not necessarily indicative of future results.