Most investors have a somewhat hands off approach when it comes to their portfolio, as most individual account holders are not full time traders. However, even passive investors have a tendency to look on in envy when they hear of investors who have enjoyed incredible windfalls in the investment market.
This portfolio envy comes about due to the makeup of most portfolios, which are generally a mix of stocks, bonds, and cash weighted by the type of account the individual has; defensive, income, speculative, or hybrid. Even with speculative portfolios the basic investment instruments remain the same.
The inclusion of derivatives such as puts, calls, and spread bets and tactics such as short selling are seldom part of the investment basic. The same applies to Forex.
Forex, the trading in foreign currency, is a popular and potentially very profitable investment vehicle. Many investors shy away from Forex for a number of reasons. The first is because Forex trading looks and sounds complicated. Forex news sites are often aimed at day-traders. Perhaps the most off putting aspects is that a Forex search usually leads investors to sites which promise results, which are frankly not credible.
Including Forex as part of an investment portfolio is a sound strategy, and one that can be implemented by almost any investor.
The easiest way to include Forex investments in a portfolio is through Exchange Traded Funds (ETF). These funds offered cover a wide range of Forex investments and trade the same as traditional stocks. ETF’s take away the need for day-to-day market monitoring. EPF’s are also generally less volatile than trading individual currencies or currency pairs. The return may not be as dramatic but the risk is also somewhat minimised.
The other method is to set up a managed Forex account. This account works like a majority of brokerage accounts; the broker handles the trades based on the investors risk tolerance and long term objectives. Forex trading is a specialised investment vehicle so those looking to add currencies to their portfolio should look for a reputable broker such as CMC Markets.
Forex should be considered as part of a diversified account and is practically a must for speculative accounts, but can also play a nice role in income and defensive accounts as well.