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Invest in a PAMM-Account. How does it work?

Dec 9th 2010 at 12:09 PM

Wealth is the slave of a wise man. The master of a fool. (Seneca)

Is wealth management really that easy? Many of us can earn and spend money, but not many of us can manage it. But since we are all wise here, we know that money management is the key to success! So if you have a knack for money management, why not make money on it? If you can’t manage money? There is a simple answer to these questions: Management and Investment!

Here we present an example of both types of activity:

Management and Investment

A successful trader, Smith, opens a PAMM-Account at Alpari and becomes its Manager. The Manager’s Capital is 20,000 USD (pic. 1). Smith then presents Alpari clients with the opportunity to place their funds under his management. The Manager (Smith) proposes to share the profit between the Investors every month (trading interval), while 20% will go to the Manager (Smith) as remuneration for his work.

1.pngPic. 1. PAMM-Account 20,000 USD.

Investors Simpson (Investor 1) and Ford (Investor 2) decide to invest their funds in Smith's (Manager's) PAMM-Account. Simpson and Ford invest 50,000 USD and 30,000 USD respectively. Thus, the PAMM-Account balance, including the Manager's capital, is 100,000 USD (pic. 2).

2.pngPic. 2. PAMM-Account balance at the start of work on the account

Due to the Manager's successful performance, the PAMM-account makes a 50% profit (50,000 USD) on the intitial deposit (100,000 USD) in the first month and the PAMM-Account balance becomes 150,000 USD.

Respectively, Investor 1 (Simpson) makes a 50% profit (25,000 USD) on his original investment (50,000 USD) and pays the Manager remuneration in the amount of 20% (5,000 USD) of his profit. 
Investor 2 (Ford) makes a 50% profit (15,000 USD) on his original investment (30,000 USD) and pays the Manager remuneration in the amount of 20% (3,000 USD) of his profit (pic. 3).

3.pngPic. 3. PAMM-Account balance at the end of the first month

The Manager’s (Smith's) work on the PAMM-Account during the first month results in a net profit of 50,000 USD:

  • Investor Simpson — 20,000 USD;
  • Investor Ford — 12,000 USD;
  • Manager Smith — 18,000 USD (10,000 — profit on his share, 8,000 — Manager’s Remuneration).

At the beginning of the second month, the Manager (Smith) withdraws his profit (18,000 USD), Investor 1 (Simpson) completely reinvests (reinvestment — buildup of earlier investments using profit made on them) all his funds (70,000 USD), and Investor 2 (Ford) withdraws 2,000 USD and reinvests his remaining funds (40,000 USD) (pic. 4).

4.pngPic. 4. Reinvestment and Withdrawal of Funds

Another Investor, Jackson (Investor 3), joins the PAMM-account and invests 10,000 USD (pic. 5).

5.pngPic. 5. The PAMM-Account balance at the start of the second month

Due to the Manager's successful performance, the PAMM-Account makes a 100% profit (140,000 USD) on the initial deposit (140,000 USD) in the second month and the total PAMM-Account balance becomes 280,000 USD.

Respectively, Investor 1 (Simpson) makes a 100% profit (70,000 USD) on his original investment (70,000 USD) and pays the Manager remuneration in the amount of 20% (14,000 USD) of his profit.
Investor 2 (Ford) makes a 100% profit (40,000 USD) on his original investment (40,000 USD) and pays the Manager remuneration in the amount of 20% (8,000 USD) of his profit.
Investor 3 (Jackson) makes a 100% profit (10,000 USD) on his original investment (10,000 USD) and pays the Manager remuneration in the amount of 20% (2,000 USD) of his profit (pic. 6).

6.pngPic. 6. PAMM-Account balance at the end of the second month

The Manager’s (Smith's) work on the PAMM-Account during the second month results in a net profit of 140,000 USD:

  • Investor Simpson — 56,000 USD;
  • Investor Ford — 32,000 USD;
  • Investor Jackson — 8,000 USD;
  • Manager Smith — 44,000 USD (20,000 — profit on his own share, 24,000 — Manager’s Remuneration).

This example has described the general framework of work on a PAMM-Account at Alpari. It is intended to show you the opportunities to profit from the management and investment of funds.

PAMM-Account * To me asked a question in occasion of ID the necessary account at registration and a personal cabinet on platform ZuluTraide.id=1201302

1 comments
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Sep 4th 2013 at 4:07 AM by marty
Great,thx for sharing,mc.
   

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