The popularity of managed forex funds has been phenomenal over the last few years. The rise of managed forex funds is, in some respects, not completely surprising. As we will see in this article, there are several elements which have led to the massive boost in investors who've chosen a managed forex account as their chosen investment vehicle.
The boost of managed forex funds started around 2 years ago. Investors had been worn-out of losing money on the stock market, and had been researching investment alternatives. Lots of folks thought that investing in real estate was the answer, and invested heavily in purchasing rental apartments, and second and third homes. But when the recession came, thousands were made bankrupt.
But investors in managed forex funds were lucky. Currencies performed really well as all other asset classes crashed. The key factor behind this is that there is no correlation between forex managed funds and other investments.. What this means is that there's no connection between the performance of the stock market, with that of currencies.
Diversification is the key to getting better investment returns. Investment specialists all agree that a broad, diversified portfolio is vital to weather recessions like we are seeing now. A managed forex fund can consequently be seen to be an ideal addition to a mixed investment portfolio.
So are there any pitfalls that require to be addressed prior to taking the plunge and investing in a managed forex fund, The most necessary trouble is stay away from managed forex funds run by unscrupulous fund managers. This has primarily been driven by the world wide web, all a manager require to do is to set up a website, and provide his services.. Therefore, an investor requirements to do thorough research into possible investments.. This consists of carrying out research on the money manager, seeing account statements, and checking where the manager is located, to check that he is real, and not a fraudulent manager.
Let's take a take a look at the performance of a managed forex fund. Performance depends on lots of things, including the investment strategy, plus the degree of leverage being employed. 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 an additional conservative approach to trading, using incredibly little leverage, and targeting lower returns, around 10% to 15% per annum. This is really a low return, but the upside is that your risk is also incredibly low.. Of course, you could opt for additional risky strategies, where you could double your cash, but there's also an inherent risk there as well. The answer would be to come across a fund, and a manager, which is right for your level of risk tolerance.
It is a simple equation extra leverage equals more risk, and a lot more risk of a fund meltdown.. It is for this quite reason why most forex traders blow up their accounts, as they take too lots of risks, and when a trade goes against them, they lose all of their money. If the manager uses additional leverage, there is a larger chance of the fund blowing up, and investors losing all their funds.