In the last 2 years, EVERYONE has been "really good".
What is your definition of "really good"? Has he consistently beat the market? Or has he simply made a lucky pick? Do you even KNOW what his returns have been against the market?
"Ill-advised" is not the right word. There's a reason money managers need to be licensed. If you actually do this, you'll learn within six months why it was all a bad idea.
It is extremely ill-advised.
But if you insist on going through with it anyway...structure your written agreement, yes you need a written agreement just to be clear on the details so you two don't get in a fight about it later.
The details are that you get the first 10% of profits, and maintain control of your account. (which means don't give him the password.) Any profits over 10% you and he split, after deducting all brokerage fees and costs. And you pay him after 365 days.
So if after a year you made 20%, you deduct all the fees (maybe 1%, hard to tell without any numbers), then subtract your first 10%, and split the remaining 9%. You get 14 1/2% and he gets 4 1/2 %
If he really is good, you'll be paying more than a professional percentage wise, but you'll be getting better results. And if he isn't that good you'll lose your money, which is why the first part of my answer bears repeating : it is ill-advised.
You need to learn about stocks yourself.
This is your roommate so we assume you are very friendly to this person. If it's truly a friend helping a friend then your friend shouldn't want or expect any remuneration. If you want to "reward" them for making you money, then reward them informally. Buy them lunch or a vacation or such. How will your relationship stand the stress if your roommate loses money for a few months or a year?
Seriously - financial arrangements between friends result in more lost friendships than anything else. Just lend a friend money and see how long you can stand NOT being paid back IF they appear to have the money to do so?
Professionals get paid in 1 of 3 ways typically. 1) They charge a commission to place each trade. Your brokerage will already charge you so this person will get paid and the brokerage (pay twice!) 2) Through load fees where they charge a % of the initial investment you make. 3) They charge annual fees. These annuals are typically 1-3%. I would not do this at all. Highly dangerous. You could lose your money to theft or bad investments. Instead set up a Schwab or Vangard brokerage account. They have funds you can invest in that will do just as good (in many, many cases) as your roommate. Trust me the vast majority of people do not beat the general market. I would invest in something like SCHD (schwab dividend ETF) or some blend fund that invests in the entire stock market. The fees they will charge will be a few tenths of a percent and that is it. They will grow over time at a very reasonable rate. For faster growth by the small cap or mid cap funds. Add in a little developing world funds also if you want. I would say try putting 75% of your money in funds that invest only in stocks. The other 25% buy some type of bond fund that invests in all kinds of things. Trust me bonds will go up and down but its always nice to have them when they do well. The 75% split it into 2 buckets. Risk and Low Risk. Risk can go into small caps and mid caps or developing world funds. The rest goes into a broad based fund. For your risk split the money 50-50 or 33-33-33 between the aforementioned types. Honestly Schwab or Vangard has very low cost funds that will most of the time beat his performance with significantly less risk. Sure you could luck out and he could be a great investor and never steal but I would be careful as can be. Maybe invest $1000 in money you would be 100% ok with losing and never seeing again. Remember if you aren't willing to lose it all then you probably won't be comfortable with someone investing it for you. Find out from them in writing what their strategy is. What will they do that will give them and your money an edge. Ask for brokerage statements of theirs that show their performance. Make sure you set up the account so that it is in your name solely. I would not even be ok with giving them the password. Just have them tell you when and what to buy and you do it.
20% of the profits would be reasonable.
My roommate is really good with stocks and although it is ill-advised I want him to manage my portfolio and I want to give him a percentage of the profits. What would be an appropriate amount percentage wise to offer him to do such a thing (something similar to what you would pay a professional would be a good answer)
