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Why invest in Forex vs. other investments?

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Posted 2nd November 2010 at 10:41 PM by emcfx

Written by Emerging Market Capital FX (EMCFX.com)

There are many individuals who invest to make supplemental income or to grow their long-term retirement. All investors want to see a positive or consistent return in their investment vehicle and have someone to trust that can manage their assets or portfolio. There are a small percentage of sophisticated investors who do their research and know how to manage their risks in order to gain a larger return on their investments. However, over 90% of investors have no idea how to pick out an investment. The majority of them rely on friends or family for insight. Here we can compare the forex market to other popular investment vehicles such as stocks, commodities, mutual funds, and CD’s.

The stock market, Dow Jones, S&P, etc… are the most heard of and the most popular type of an investment. This is why these are all you hear about through out the day from CNBC, CNN, major newspapers, to local news. When you purchase a stock you receive a stock certificate. You then hope the value of the stock goes up in price and some individuals hold the stock for long term and it stays there. If the stock value falls it might take a few years for it to return to the original purchase price of the share. Until then you are cornered in the market till the price value rises again.

Commodities are futures and options contracts that can be traded at the Chicago Mercantile Exchange or other clearinghouses. The majority of traders use options by betting on the price, whether it will go higher or lower and hoping the strike price hits before the contract expires. The investment costs are more expensive such as margin calls. But in the long run, being on the right side of the market is a larger gain.

There are over hundreds of thousands of types of mutual funds and often it is confusing to know which one to invest in. These funds are a pooled investment with a fund manager in charge of the portfolio. Most of the mutual funds offer a range from low to high-risk returns. There are maintenance fees and early withdraw penalty fee. If the market goes down, the mutual fund goes down with it. The only drawback is you do nothing or take an early withdraw penalty to minimize your losses.

CD’s, certificate of deposits, have fixed rates and offer short to long terms. One advantage of a CD is peace of mind of receiving a fixed rate of return at the end of the term even though it may be low yield.

In comparison to all of these, the Forex Market trades $3.2 trillion dollars in volume each day. This fact alone shows the liquidity in this market and there are always buyers and sellers in the market 24 hours a day, 6 days a week. There are four major sessions in the U.S., Asian, European and London markets. In the spot market there are no expiration dates, no early withdraw penalties, no maintenance fees, no management fees or advertisement fees involved like many other investments have. The one true advantage of trading in the currency market is that you can enter or exit when the market is up or down and never get cornered.

In summary, stocks ownership is a long-term investment with ups and downs. Commodities can be rewarding but the downside is margin calls. With mutual funds the only drawback is that there are so many to choose from. Certificate of deposits offer a low yield in return. The forex can be rewarding with proper control risk management managed by a forex fund manager.

© 2010 EMCFX
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