subject: 7 Techniques Of Increasing Portfolio Performance With Managed Forex Funds [print this page] The popularity of managed forex funds has been phenomenal over the last few years. 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 ascent of managed forex funds started around 3 years ago. Investors were exhausted of losing their investment on the stock market, and were actively seeking out an asset class which would make a profit in good times, and also when the economy was suffering. The answer for many people was the housing market. But when the credit crisis happened, many people lost everything.
During this period, however, investments in managed forex funds had gone from strength to strength. However, managed forex funds were the of investors at this time. The key factor behind this is that there is no correlation between forex managed funds and other investments.. In other words, if the stock market goes down, the currency market may still go up.
Diversifying your portfolio is crucial to maximizing returns over a long period of time. Investment experts all agree that a broad, diversified portfolio is vital to weather recessions like we are seeing now. A managed forex fund can therefore be seen to be a perfect addition to a mixed investment portfolio.
So, having discussed the potential benefits of a managed forex fund, what about the potential pitfalls? The most important difficulty is to avoid managed forex funds run by corrupt money managers. Unfortunately, the advent of the internet has meant that managers can hide behind a website, and rely on the anonymity that the internet provides. Therefore, it is essential that the potential investor does his research before investing. This includes carrying out an investigation on the forex trader, seeing performance statements, and checking where the manager is situated, to check that he is honest, and not a fraudulent manager.
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 managed forex funds have very conservative trading strategies, and will therefore only have returns of maybe 12% or 15% per year. This is a low return, but the upside is that your risk is also very low.. Other more risky strategies could gain you 60% or more, but need to accept that there is a risk of losing your 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.. What some people fail to understand, is that leverage is the main reason that most currency traders, and for that matter, most forex managers, fail, and blow up their accounts. 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 are better in a number of ways compared to all other asset classes. However, investors must still have to conduct in depth research into what variety of managed forex fund is right for them. We saw that there are a wide range of managed forex funds, and investors have differing goals and ambitions. With first-class research, and investor can find the right managed forex fund for them.
