Nowadays, investors have the option to earn high returns in the foreign exchange market by passively investing in managed Forex accounts.
There are many reasons why the currency market may be a better place to put your money at the moment, especially given the low interest rates worldwide and the low returns on bonds in the current economic environment. And even stocks are rumored to be in a gigantic bubble even though they are still moving up.
Trading the currency market unlike stocks works the same way in a bull and in a bear market. It’s just as easy to sell a currency pair as it is to buy it. So, the main takeaway is, profits in the currency market are not susceptible to recessions or bear markets.
Forex traders can make money during recessions just as easily as during expansionary phases in the economy. And now you can too by investing in Forex managed accounts.
So, what is the Forex market and why it may be better than the stock market?
There is always a possibility that a stock’s value will go to zero and the company goes out of business. Not in the Forex market. In fact, currency trends are much more stable then trends of individual stocks. Most of the time currencies will trade in cycles from up to down making them perfect for all kinds of trading strategy.
While a stock may increase its value 4000%, very often during recessions stocks can easily lose 50%– 60% of their value. And we know that getting out of a position in the equity market is not that easy. Which brings us to the next point.
Liquidy. The Forex market is the largest and most actively traded market in the world and it’s open for trading 24 hours per day Monday to Friday. So, executing positions is rarely a problem and transactions happen fast and easy. This is important for investors with large capital also because they can be sure that they will get the best possible prices on their transaction.
Leverage is also unique to the Forex market not to say that leverage is not available for the stock market, but rather the size of leverage offered in the Forex market is least 10 times greater than in the stock market.
Through the use of good risk management practices and a good trading strategy, the risk associated with high leverage can be minimized while profits can be maximized.
So, passive investors who are looking to invest in a professional investment firm like mutual funds, or ETFs should have a look at Forex managed accounts also because the unique benefits that come from the nature of the currency market may be just what they were looking for.
Let’s now see how a Forex managed account works and what options are available to you?
The basic gist is that the investor finds either a professional fund management company or a retail broker that offers managed accounts. Then the investor deposits his funds and assigns a manager for his account who will trade it for him. After that, the manager will do everything and the investor can check back from time to time.
Fees and commissions apply and the investor will need to share part of the profits with the manager.
In terms of what options investors have to choose from when it comes to managed accounts for the Forex market, there are two main “categories” as we noted earlier.
First, the investor can choose to go with an investment firm like a fund management company which can vary from small to huge like the notorious hedge funds. And, second, the investor can opt in for a managed account with a retail Forex broker.
The main difference between the two categories is the expertise of the managers. Normally the money managers at the professional fund management firm will be the most reliable choice simply because he is likely to hold some sort of license or certification for his position on the job and he is required to pass some training and tests before he can be assigned to manage clients’ funds.
Now with retail brokers, none of that is the case, and the requirements are much much lower to get enlisted as a manager.
Usually, there is a minimum amount of funds that the manager must deposit as a way to ensure that he will indeed take care of his clients’ money. Beyond that, retail Forex brokers don’t have requirements for training or any certifications. So, basically anyone, any self-taught trader, proven or not proven in his skills can get enlisted as the manager of choice.
Now, why would someone invest in a managed account with a retail Forex broker when obviously the trained money managers at fund management companies clearly seem to be the better choice?
Simple answer, minimum depsoit requirments.
Investment firms will normally have much higher minimum deposit requirements.
Does this mean that the managers at retail Forex brokers have no clue on trading and investing?
No, not at all.
As a matter of fact, there are a lot of great traders who understand the market very well and who are consistently profitable that manage funds through a retail Forex broker. The thing is that the investor needs to do some research to finds the good managers here.
There is nothing stopping the managers of a PAMM or MAM retail account from making more profits than some manager at an investment firm.
At the end, hopefully, this article will help you make the better choice on your future investments in managed accounts.