Forex managed accounts are quite popular today. Many companies will provide this service for you.
As for whether it is wise to have someone manage your account or not, this is up for debate. There are pros and cons to it.
Obviously one of the biggest benefits of managed forex accounts is that they do not require an in-depth knowledge of the market on your part. All you have to do is put money in your account, and somebody from the company will do the investing for you.
It is very similar to having a mutual fund. This is widely used by beginners, since it does not require any knowledge. It is also perfect for people who have full time jobs, and do not have the time necessary to make investments on their own.
However, it is expensive. It requires a large deposit to even be able to open an account. It depends on the company, but you usually need $5-25,000 to put in immediately, depending on the company.
A managed forex account will always require a higher initial deposit than an account you manage yourself. In addition, every time you want to add more money, you usually have to put in at least $250. Again, this number depends on the company you are using.
You can deposit the money either by bank transfer, check, or using a credit card. And you are allowed to put in and take out money all the time. If you are withdrawing cash, you can generally have access to it in 48-72 hours.
Then there are the fees. The managing companies will take a commission on every profitable investment, generally somewhere in the 30% range. They will also require a percent of the BID and Ask. They will additionally charge fees for every transaction. And in some cases you have to pay them a yearly rate on top of all this.
So all this can dramatically eat into your profit margins. This is why having a forex managed account is so risky. You have to achieve a very high ROI to be profitable.
Just make sure you do not gloss over the fine print when signing with any company. Some of them might have hidden fees you do not find out about until after you have opened the account.
So essentially, there is a lot more profit potential if you invest yourself. The drawback is that it takes time to learn about currency trading. However, if you are willing to put in the work, you can make a lot of money.
If the high fees of managed forex trading have not scared you off, you have to decide on the best broker. There are a number of ways to do this.
The best method is to just find out whether the person managing your account is using the same investing strategies themselves. After all, if they were really such a good investor, they will obviously invest their own money as well. Therefore, ask to see their personal portfolio of investments and see how profitable they have been with their finances. If they have been successful, that is a great sign.
However, how do managed accounts compare to forex robots? The former are often said to be similar to robots, in that you do not have to make the trades yourself. The difference, of course, is that with managed accounts a person is doing the investing. With a robot, a piece of software is doing it.
In general, the ROI with robots is slightly less. However, it is much cheaper to use them in the first place. Because of this, you will probably usually do better with a $50 robot than you would with an expensive managed account.
The bottom line is, hiring someone else to do your investing is extremely expensive, and very often not profitable. Because of all the fees, you would need an extremely high ROI to make money. Therefore, you would probably be wise to take a little time and learn how to invest yourself instead of trusting forex managed accounts.
Thu, Jun 10, 2010
Forex