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PAMM accounts: investment or business?

Category: Investments

PAMM accounts: investment or business?

What fundamentally differs a business from investing? In short, the business allows you to earn money, and investments - save them and increase them. Let's see what a PAMM service is - a business or a tool for investing made money. We will answer briefly: looking for whom. Next, we analyze this thesis in order.

For investors, PAMM accounts, as the definition implies, are undoubtedly an investment tool. As you know, any business has a specific life span. He is born, develops, and then dies. As a rule, at some point when the business owner has an excess of money. He begins to think about how to make money earned by itself generate income without making efforts on the part of their owner. Well, if you didn't know about it, spent all the money you earned on yachts, houses and expensive cars, then you are to blame. Most likely, after the death of one business, you will have to build a new business, and then you will have to think carefully about providing passive income.

We will not dwell on the advantages and disadvantages of PAMM accounts compared to other investment tools since this is a topic for a separate article. We only note that here, when deciding on investing money, an investor can choose the Profit / Risk ratio to his liking, having formed his portfolio from a wide variety of PAMM accounts.

True, some investors, instead of forming a portfolio of several PAMM accounts and forgetting about them for a while, start to rush around and drag funds from one account to another in the hope of earning not, say, 50% per annum, but, say, 500%. Such throwing is already a little like investing. Instead, it resembles a gamble at the races: what kind of trader today will come to the finish line first? So, as we see, PAMM accounts can be for investors, not only a tool for investing but also gambling entertainment.

And what is a PAMM service for a manager? But for the manager, his PAMM account is, first of all, a business. Otherwise, why would he need this PAMM? He would trade and trade for his own money on his usual trading account. And so the manager goes into public space, attracts investor funds. Why is he doing this? Hardly for fame alone. Most likely, for profit. And this is a business.

In contrast to the classic business, there is one significant drawback in managing a PAMM account: the manager cannot go on vacation for several months. But, having returned, find his account in even better condition than he left it. Nevertheless, I insist that managing a PAMM account is just a business since the income in it is not limited to the personal time of the manager. Strictly speaking, his salary is generally unlimited.

You can ask a question: if the manager reinvests the profit received from the management of the PAMM account? I am not inclined to consider this an investment for two reasons:

  • The manager cannot invest funds and forget about them, receiving passive income - he must manage them.
  • By increasing the manager's capital, it increases the attractiveness of PAMM accounts for investors, which is also an element of the business.

Thus, we can conclude: PAMM-account is an investment tool for an investor and business for a manager.