Investing in Forex Funds

Investing in Forex funds can be an effective way to gain exposure to the Forex market without having to take on the responsibility of actually trading the market. Learn the basics of fund investing and how it works in the foreign exchange market.

Investing in Forex funds can be an effective way to gain exposure to the Forex market without having to take on the responsibility of actually trading the market. This form of investment works in much the same way as investing in traditional mutual funds. Here are the basics of these funds and which ones you may want to invest in.

How They Work

With a Forex mutual fund, many investors pool their money together and give it to a mutual fund manager. The mutual fund manager then is in charge of investing the money. The manager uses the millions of dollars from investors to trade the market.

The strategy of the mutual fund can vary significantly from one case to the next. Some funds buy and hold particular currencies that they believe will appreciate in value as compared to other currencies. Other funds use a short-term investment approach and buy and sell many different currencies on a daily basis.

Advantages

One of the advantages of investing in these funds is that they are diversified. Since the fund has millions of dollars in assets to invest, it can take many different investment approaches. Some of its investments can make money while others may lose money. If some of the trades lose money, it will not devastate your investment. If you were to invest on your own, you may not have enough money to completely diversify your account and your investment fortunes will be tied to the performance of only a few trades.

Another advantage is that this allows you to invest in the Forex market without having to make the individual investment decisions. You don't have to keep up with which Forex currency pairs are doing well and which ones are going crazy.

Drawbacks

One of the downsides of this type of investment is that you don't really have control over your investment. You leave everything up to an investment manager. If you're the type of person who likes total control over their investments, this is probably not the option for you.

Another problem with this type of investment is that you have to pay expense ratios and other costs. This cuts into the profit that you could earn on your money.

Popular Funds

If you're looking for some good funds to invest in, you definitely have a lot of options to choose from. If you're in the market for a long-term fund, one of the options to consider is the Merk Hard Currency fund. It has a 5 year return of 7.12%.

Another example of a good long-term fund is the Franklin Templeton Hard Currency fund. This one has a 5.92% 5 year return.

Short-term funds haven't been doing as well as the long-term funds lately, but they can sometimes still be profitable. For instance, the Merk Asian Currency fund has a 4.18% 1-year return.

Considerations

Before you go out and put your money into this type of investment, you need to do your homework. Look at the expense ratio of the fund, as these costs can significantly eat into the profitability of the investment. Also look at the long-term track record of the fund to see if it's worth investing in.

Return From Forex Funds to Forex Trading Systems

Return From Forex Funds to Forex Trading