How Do You Raise Outside Money?

Hey everybody, it’s Michael Martin. Happy Thursday, and I appreciate you being here. I also want to, again, thank you for writing in all your comments and your questions because I get to learn a lot and it helps me go back in time. I’ve got 35 years of experience and it’s hard for me to go back and kind of harvest ideas from any particular timeframe. So the questions actually bring me back to certain milestones or hoops that I had to jump through. And the hoops, yes, they change their size and they change their angle. They change the distance from you. They don’t go away though no matter where you are in your career. So yes, in the beginning there’s certain things you need to achieve and then towards what would be considered still your early years, but where you have experience, your hurdles are different, but you still have them.
And then when you’re fully blown, for example, you still have hoops, but yet again, the conditions are different. So no one has actually ever leaved from the mental game or the psychological game of having this as a career. There’s so much to it. No. Again, yesterday or Tuesday, we spoke about lifestyle and managing your cash and doing all that. So there’s different pressures that come into play. Question came in, I’ll put two of these together. How do you raise outside money under the proviso that you have a two and 20 type of a structure or some type of profit allocation? You have a share in the winnings that can enhance your own trading because once you get paid, whether you do it monthly or quarterly, you can take those funds, put ’em in your trading account, you can take those funds and put ’em in your savings account.
Doesn’t matter to me. You have to figure out what’s best for your budget. But raising outside money can help you amplify your cash and get you closer to if you have a job and you have a career or you’re doing something that’s not in the world of trading, but you eventually want to segue into trading, running other people’s money under a disciplined set of rules can help accelerate your financial abundance so that you can turn away from your nine to five job or whatever it is that you’re doing right now, that you’re no longer in love with, or you’re thinking of segueing from. Doesn’t have to be tomorrow, but you want to have a plan. Running outside money can be pretty lucrative type of a deal. And it’s how most of these guys that you’ve read about, whether it’s Ray Dalio or Paul Tooter Jones, like Stan Druckenmiller over time, that’s how they’ve made so much money, is that not only did they grow their own money from their trading, but they were taking profit allocations from other people.
And then that money finds its way into their own trading accounts or savings. And so then you can go parabolic with how, you know, grow your net worth. Then you get to a point where you’ve got five or 10 million and you realize you can get 5% on a treasury bill with no risk. And so if you get burnt out and you want take a year off, you could take your 10 million and buy a nine month piece of paper for 5%. And although you’re buying it a, it’s no idea, original is a discount, you’re not getting paid the interest per se, you’ll earn half a million dollars over the course of the year for just living on the residual passive income on your investments. Get your head back in the game and then come back and do it. It gives you a lot of flexibility where you don’t have to force yourself to do things that don’t feel right.
You never want to have to do that in life. Well, trading is no different. If you’re dating somebody and something doesn’t seem right, trust your instincts. You might not be able to actually identify it or articulate it, but trust your feelings, trust your instincts, and so go from there. So the other question, this is kind of like a combo episode. What do I do every day to keep my head fresh outside of the trading stuff? So I mean, I have a list of things that I try to do to that serve me and my mental game that are completely unrelated to trading. I try to take a minute and quiet my mind. You don’t have to call it meditation, just quiet the mind once or twice a day. Sometimes that could be deliberately just sitting, still going inward. A lot of times it’s doing art. I paint and I also play guitar. So that’s on the schedule. Even if it’s just for 15 to 30 minutes each. I try to put it on the calendar so that I feel more complete as a human being. I don’t think, even if you’re starting out and you’re about becoming a trader, if all you’re thinking about is the markets, I don’t think that’s a healthy response. I think you need to know and have a break, give your mind a chance to work on things behind the scenes.
When I was coming up, again, I think it’s harder today to focus because there’s just too much out there. There’s too much noise, and the majority of it is noise. I don’t want to call anyone out. Cause this isn’t like, I’m not Ed Bradley, the late Ed, great Ed Bradley from 60 Minutes is probably the best journalist on planet Earth ever. I’m not trying to gotcha, this isn’t gotcha journalism, but I see a lot of hokey stuff that folks are marketing and trying to appeal. If you see a fancy watch in a video sales letter, or if you see somebody pull up in a Lambo or a McLaren, that that’s targeted to young, younger guys, not necessarily adolescent guys, but say 22 to 32 people who are impressed with that, and I guarantee you they have a price point that fits into that model too.
It’s very calculated. It’s not random. So no one needs to see Michael Martin’s MTV Cribs, right? Or whatever that is. There’s not a lot to see anyway. I tend to leave a live a very simple lifestyle. So I try to go inward. I absolutely write, and that can be ideating, interpreting questions and ideating for the show. It could also be reinforcing my self-talk, right? How do I talk to myself? Shut up when I’m talking. No, just kidding. So what’s my inner voice, right? That’s very important because you become what you say to yourself. You get what you think about. So you better have good self-talk if you’re constantly beating yourself up, it’s hard to trade. Well, it’s hard to do anything in life. Well, if you’re hyper-critical of yourself. Two, you need to be aware of your environment because the people in your life can have a very subtle effect on how you think of yourself because of the way that they treat you.
And so I like to believe that I teach people how to treat me, and I draw pretty clear boundaries around that stuff. So I write that stuff out. I like use as you, I’ve, I mentioned before, I got notebooks all over the place. I like to use pens because there’s something about the creative process that also helps your synapses in your brain. Then if you were typing it out on a computer, so I, I’ll paint, which is messy, so I have to get cleaned up and I have dropped cloths all on the floor and stuff set up for that. I play guitar. So sometimes, and that too is meditative, right? I practice jiu-jitsu every day, but Sunday because the gym’s closed on Sunday. So I train every day. And that’s important to me, both for mental health and for my physical health. I wouldn’t call it aerobic exercise, it’s largely anaerobic, but it’s just, it’s good for me.
And I mentioned to you there’s goals attached to it from belts. There’s also the discipline of knowing that I’m going every day. Last night I got beat up. You can’t tell by looking at me, but it was a sparring class. So you go through some warmup and some stretching, then you do some fundamental drills and then you know, put your mouth pieces in. And I won my first match and I got smashed on the other two. But they were younger guys who were upper belts from me. And that’s just the way it goes. If I’m not in it, I’m not learning, I’m not getting better, which is just trading. And I mentioned, that’s why I do it, to reinforce that discipline muscle that I have that I live on. That’s very, very important to me. But it’s outside the world of trading. So it’s important to me for my own development, even though I might be older than many of you or have a very different business model or trading strategy than some of you, I try to eat, well, I inadvertently do this intermittent fasting thing just because I wake up so early, I’m just not hungry at five in the morning.
Maybe you are, I don’t know. I typically don’t do any kind of stimulants. I’m not a big coffee guy.
And so by the time we’ll get to like 11, 12, 1 o’clock Pacific time, then I’ll have something to eat that’s pretty healthy. Then I’ll have something after class just because you burn like 1500 calories in a jiu-jitsu class. So you come out of there kind of starving. Plus, I haven’t really eaten a really big meal and I vacillate with wanting to eat before CLA class versus after class. Cause I don’t want to go to bed with a gut full of food. But that’s how I do it. So I break up my day, I time block everything. I’m not going to show Ferrari’s or fancy watches in my videos.
And that’s that. The last part of the questions that came in dealt with raising money, and it’s not on the YouTube channel, but if you go to Spotify or if you go even to martin, there’s a search bar in the top. There’s literally episodes on how to talk to backers, how to raise money from outside investors. Where I went at length about that subject matter. I don’t think I can add much to it other than saying make sure if you’re approaching people who are potential clients, make sure that you know how to articulate what is your value proposition. What is it that you do in running money that they can benefit from? Maybe part of it is that you’re going to actively manage the account, but you’re going to keep your draw down smaller than passive buy and hold. So then you can go back and look and what if someone bought and held the s and p, how what they have done, how big were the drawdowns?
How long did they last? And again, if you think that’s too much work, then just recognize that when you do your studies, your self-study on your relative strength on how bad you want to be a pro trader. Because trader’s going to want to look at that and know that data. Now, if you’re talking with backers, that’s, that implies there’s something else for them. So a backer could be somebody who has 5 million bucks, they believe in you and they want to give you money to run, and you’re going to actually be able to charge fees, build a track record with real money. But they might end up owing owning 10 to 49% of the company as well. So be sure that you can articulate what’s in it for them if they step up and they help you, because at that point, they’re kind of a business partner. Even if they’re a limited partner, they can be successful business people. It wouldn’t hurt if you talk to independent investment advisors, could be good referral sources for, especially if you’re trading commodity futures, because it would be considered an alternative asset class, which the investment advisor typically wouldn’t advise on because it’s not part of their licensing. If they’re registered under like a, say
The Uniform Investment Advisors Act in 1940, there’s a test involved with that. It’s a Series 65. Yes, there are some exemptions in terms of who has to register and either at the state level or at the national level, right, with the S sec itself. But in terms of doing commodities or commodity futures and then especially, oh, the battery died.

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