How do you go about returning money to investors
Ive been given a bit of money from my relatives to manage for them in my stock portfolio. I'm wondering what is the best way to go about reporting returns and liquidating their initial investment. Lets say they toss me a stake of $10k and my existing portfolio is worth $90k for simplicity. Im thinking they ought to get 10% of the excess returns I generate. If I were to add more of my own money in, their share would get diluted unless they put up more capital.
Now some outstanding questions I have:
1. If I were to liquidate one of my positions, should they automatically get a cut of my excess returns? What if I plan on reinvesting the proceeds?
- Lets say they decide to cash out three years down the line. Do i just write a check for the implied return since I will have likely not exited my investments? Given that I will have to pay taxes on capital gains, should i net that out from their returns along with a 20% performance fee? So if they end up earning $10k on a $10k investment, I take $2k away from the long-term capital gains tax i will end up having to pay later on and $1.6k (20% of remaining 8k) as a performance fee?
Any advice on how to keep this simple is appreciated!