Managed forex funds are now an essential part of all sophisticated an ‘in the know’ investors. The rise of managed forex funds is, in some respects, not completely surprising. This article examines the reasons for the incredible rise of managed forex funds.
The ascent of managed forex funds started around 3 years ago. Investors were tired of losing money on the stock market, and looking for alternative asset classes into which to invest. Many people thought that investing in real estate was the answer, and invested heavily in buying rental apartments, and second and third homes. But when the recession came, thousands were made bankrupt.
But the forex funds business had fantastic returns in this period. 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.. What this means is that there is no connection between the performance of the stock market, with that of currencies.
A prudent investor will diversify his portfolio to maximize his 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 unique asset classes, is key to obtaining the best returns. A managed forex fund can therefore be seen to be a perfect addition to a mixed investment portfolio.
The advantages seem great, but are there any downsides to a forex investment? The central trouble is avoiding managed forex funds run by dishonest fund managers. The internet 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 these days.. Therefore, an investor needs to do thorough research into potential investments.. This includes carrying out an investigation on the manager, seeing performance statements, and examining where the manager is operating, to check that he is genuine, and not fraudulent.
Let’s take a look at the performance of a managed forex fund. Well, this depends on the type of forex fund which is invested in, on the market conditions, the forex manager himself, and a host of other factors. Most managed forex funds have a target return, which can vary hugely, and it will depend on the fund’s strategy.
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 answer is to find a fund, and a manager, which is right for your level of risk tolerance.A lot depends on how much leverage the fund manager of the managed forex fund uses.
It is a simple equation – more leverage equals more risk, and more risk of a fund meltdown.. Leverage is the downfall of most currency traders, and this is no different for managed forex funds. Well, this can also happen to managed forex funds. The performance of a managed forex fund is only as good as the manager, and if the manager takes reckless trades, and big risks, then the fund will suffer the same fate.
So, therefore, it can be seen that managed forex funds have a variety of advantages as opposed to other investments. However, investors must still have to carry out in depth research into what form of managed forex fund suits their investment style. We saw that there are a wide variety of managed forex funds, and investors differing investment goals. With excellent research, and investor can find the right managed forex fund for them.
Andy Curtis is a professional forex trader. You can get extra details on the subject of a variety of leading managed forex funds and assessments of individual forex money managers at his site specially designed for foreign currency traders, Managed Funds.net.