7 Tips On Investing In A Managed Forex Fund
Managed forex funds are now an essential part of all sophisticated an ‘in the know’ investors. Yet this increasing popularity is not such a big surprise. This article examines the reason for this popularity, and will conclude that all investors would have some exposure to the currency markets.
The escalation of managed forex funds commenced around 2 years ago. Investors were fed up of losing their investment on the stock market, and were researching investment alternatives. Millions jumped into the real estate market, on the back of soaring prices and cheap loans. But when the credit crisis happened, many people lost everything.
But those wise enough to invest in forex managed funds avoided all of this. However, managed forex funds were the of investors at this time. The rationale behind this is the lack of correlation between managed forex funds and other asset classes.. This basically means that there is no connection to the performance of currencies to the stock market, or to any other investment.
Portfolio theory dictates that the key to improving investment returns over the long term is to diversify your portfolio as much a possible. Investment experts all agree that a broad, diversified portfolio is vital to weather recessions like we are seeing now. Naturally, an investment in a managed forex fund fits in perfectly with this idea of diversification.
So are there any pitfalls that need to be addressed before taking the plunge and investing in a managed forex fund? The key issue is avoiding managed forex funds run by dishonest wealth managers. This has primarily been driven by the internet – all a manager need to do is to set up a website, and offer his services.. Therefore, it is essential that the potential investor does his research before investing. This includes carrying out an investigation on the money manager, seeing account statements, and verifying where the manager is situated, to ensure that he is genuine, and not fraudulent.
So what are the returns on managed forex funds? Well, the returns depend on a variety of factors, such as leverage, strategy, the manager himself, and the market conditions. The majority of forex funds have a return of between 10% and 60% per year, but this will vary from manager to manager, and also from year to year.
Some funds take a more conservative approach to trading, using very little leverage, and targeting lower returns, around 10% to 15% per annum. Whilst these figures sound very low, you need to realise that the advantage of such a fund is that you are taking very little risk on your money.. Other strategies, on the other hand, take bigger risks, and can sometimes make more than 50% or even 100% return per year. Of course, you might lose a lot of you investment aswell. The key is to find a strategy and managed fore fund which matches your risk levels.The first, and certainly one of the most important factors which determine the rate of return, is what degree of leverage the manager is using.
It is obvious that the more leverage being used, the higher the risks involved.. It is for this very reason why most forex traders blow up their accounts, as they take too many risks, and when a trade goes against them, they lose all of their money. Managed forex funds are no different. The fund is reliant on the manager, and the more leverage he or she uses, the bigger the risks involved.
So, therefore, it can be seen that managed forex funds offer a significant number of benefits as opposed to investing in regular, run of the mill mutual funds, stocks, shares, and also to other asset classes such as real estate, or even commodities. Even so, investors must still have to conduct in depth research into what form of managed forex fund is right for them. There are an infinite quantity of managed forex funds on the market today, and investors differing investment aims. With decent research, and investor can find the right managed forex fund for them.
Andy Curtis is a professional forex trader. You can get more particulars concerning a variety of leading managed forex funds and critiques of individual managed forex accounts at his web page specially designed for foreign currency traders, Managed Funds.net.