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Fx Managed Funds - Will They Represent The Future Of Safe Investments?
By John | September 4, 2010
The ascent of managed forex trading funds began around three years ago. Investors were worn-out of losing profits on the stock market, and looking into alternative investments. 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. Currencies performed very well as all other asset classes crashed. For the reason that there is little or no correlation between the currency market and the stock market. To put it differently, if the stock market goes down, the currencies market may still go up.
Diversification is the key to getting better investment returns. Whilst the experts may disagree on the exact way to do this, all agree that a balanced and broad portfolio, containing investments in many distinctive asset classes, is key to obtaining the best returns. Therefore, it can easily be seen that an investment in a managed forex fund can play a pivotal role in a portfolio’s diversification, and in turn, the performance.
So, having discussed the potential features about a forex managed fund, what about the potential pitfalls? The major problem is avoiding manage funds run by unscrupulous fund managers. The net has been a big problem with this - it provides managers with a face to hide behind - all they need is a website to get started nowadays.. Therefore, an investor needs to do thorough research into potential investments.. Including carrying out research on the manager, seeing performance statements, and examining where the manager is based, to make sure that he is genuine, and not a fraudulent manager.
So what rates of return can an investor who invests in a managed forex fund expect? Performance depends on several things, such as the forex investment strategy, and the degree of leverage being used. Virtually all 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. This is a low return, but the upside is that your risk is also very low.. Of course, you could opt for more risky strategies, where you could double your money - but there’s also an inherent risk there as well. So it’s important to find a managed fx fund which suits your appetite for risk.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 a simple equation - more leverage equals more risk, and more risk of a fund meltdown.. What some people fail to understand, is that leverage is the key reason that many currency traders, and for that matter, most forex managers, fail, and blow up their accounts. Forex managed funds are no different. The fund is reliant on the manager, and the more leverage he or she uses, the bigger the risks involved.
In summary, therefore, it can be seen that managed forex funds are better in a number of ways compared to all other asset classes. All the same, investors must still have to carry out in depth research into what kind of managed forex fund suits them. We saw that there are a wide assortment of managed forex funds, and investors have differing goals and ambitions. With first-class research, and investor can find the right fx managed fund on your behalf.
Topics: Forex |
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