Forex, an alternative investment vehicle

admin — Tue, 26 Jan 2010 06:21:01 +0000

Forex (Foreign Currency Exchange Market) has been used by international banks and large investment companies for years to make millions of dollars. However, with easy access to the Internet, it is now possible for anyone to take advantage of this powerful tool and make money the same way large institutions do, even with minimal startup funds at hand.

Even experienced investors seem mystified by Forex and have very little understanding of it. Forex is not much different from the Stock Market, often the same or similar techniques can be used to trade currency as is used to trade stocks and commodities. What make Forex so mysterious is the lack of available information and opportunities of training.

I have listed 10 good reasons why I prefer Forex to the Stock Market or any other investment option and why any individual, or small investor, should look at getting involved with Forex:

1. A 24 hour market. You don’t have to worry about running out of time because the Forex is open 24 hours a day, nearly all week.

2. Huge liquidity. Have you ever got stuck trying to get rid of some stocks or options? With Forex, there are always buyers, thousands of them!

3. No commission on your trading. This is specially important for individuals with small amount of money to invest. When using other investment vehicles the cost of the investment is often prohibitive no matter how attractive the investment itself is. Brokerage and other government fees can easily eat up your profit even before you completed a transaction. With Forex, there are no brokerage, government etc fees involved.

4. Low transaction costs. Typically less than 0.1%!

5. No middleman. The investor is dealing directly with the Market.

6. Instantaneous transactions. Forex is fully computerised and transaction can be completed in as little 2 seconds. The investor does not have to wait for trade confirmation to arrive by email, worst yet, by post. All ‘paper-work’ is in electronic format, easily viewed, search, analysed.

7. Huge leverage yet low margin. Both increase your profit. In most cases leverage of 10:1 to 100:1 is the rule not the exception.

8. Minimal startup requirements. Again very important for individual or small investors. With Forex it is possible to start trading with as little as $300.00 dollars!

9. Easy access to the Market and your accounts, online, 24/7. Since Forex is completely computerised, anyone with Internet access can trade online and easily access their account and trading history. Most trading platforms allow the user to export this information to other third party software for storage, graphing, analysis etc.

10. No insider trading. Because of the way Forex is ‘de-centralised’, it is almost impossible for anyone to fraud the system.

I could go on for ever about Forex, it is an amazing tool for investors and also a very exciting opportunity for individuals. I hope you’ll catch the fever, too.

Wishing you success,
Ference

Hedge funds – establishing a new frontier

admin — Mon, 07 Dec 2009 08:53:50 +0000

It is difficult to provide a general definition of a hedge fund. Initially, hedge funds would sell short the stock market, thus providing a “hedge” against any stock market declines. Today the term is applied more broadly to any type of private investment partnership. There are thousands of different hedge funds globally. Their primary objective is to make lots of money, and to make money by investing in all sorts of different investments and investments strategies. Most of these strategies are more aggressive than than the investments made by mutual funds.

A hedge fund is thus a private investment fund, which invests in a variety of different investments. The general partner chooses the different investments and also handles all of the trading activity and day-to-day operations of the fund. The investor or the limited partners invest most of the money and participate in the gains of the fund. The general manager usually charges a small management fee and a large incentive bonus if they earn a high rate of return.

While this may sound a lot like a mutual fund, there are major differences between mutual fund and hedge fund:

1. Mutual funds are operated by mutual fund or investment companies and are heavily regulated. Hedge funds, as private funds, have far fewer restrictions and regulations.

2. Mutual fund companies invest their client’s money, while hedge funds invest their client’s money and their own money in the underlying investments.

3. Hedge funds charge a performance bonus: usually 20 percent of all the gains above a certain hurdle rate, which is in line with equity market returns. Some hedge funds have been able to generate annual rates of return of 50 percent or more, even during difficult market environments.

4. Mutual funds have disclosure and other requirements that prohibit a fund from investing in derivative products, using leverage, short selling, taking too large a position in one investment, or investing in commodities. Hedge funds are free to invest however they wish.

5. Hedge funds are not permitted to solicit investments, which is likely why you hear very little about these funds. During the previous five years some of these funds have doubled, tripled, quadrupled in value or more. However, hedge funds do incur large risks and just as many funds have disappeared after losing big.

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Forex, an alternative investment vehicle

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