What I've done with merchants, thanks mostly to advice read here, is this.

I send a fleet to Timbuktu with 4 merchants on board, 1 spy and 2 reasonable level assasins. The spy keeps watch because later in the game other factions do arrive. The assasins give me a chance to take care of any high level merchants that show up before mine are well trained, I keep the asassins in shape by sabotaging Timbuktu. Once the merchants are about 40 years old I start preparing another identical fleet to replace them when they die.

One important thing to remember is to match the fleet to the stage of the game. You don't want a single cog running into pirates and getting sunk with that valuable cargo.

It makes a huge difference my finances.