Forex Managed Funds--Is it for you?

Most investors new to foreign exchange have heard about spot trading currency pairs on their own but many have not heard about forex managed funds.  This is when you, the investor, sign up with a reputable and regulated forex broker and then link your account to a forex account managing company.  You give limited power of attorney to the account manager. They cannot take money out or put money into your account. It is somewhat of a passive investment in the sense that you do not actively trade forex pairs (such as EUR/USD or CAD/USD) yourself but rather allow a third party to do it for you.  Think of it as forex macro management of your funds rather than micro management in which you’re sitting at your monitor hour by hour. 

The forex market attracts investors because of its liquidity, 24 hours by 5 days trading and the leverage of trading on margin.  If you do your own trading, you must follow the market, your currency pairs, very closely to know when to buy and sell.  This knowing is a skill that takes quite some education and months if not years to thoroughly understand.  Do you keep on top of world macro economics?  Do you have oodles of time to spend pouring over this or that forex trading chart?  Or do you even know anything about forex charting?  Over 90 percent of private forex retail traders lose their bank roll within 2 to 3 months.

You’ve made a chunk of money.  You don’t want it to just sit in a CD or money market fund.  You’re smart but are so busy working that you don’t have time to learn complicated investment strategies—and you sure don’t want to gamble away that hard earned cash.

If you’re lacking of time and knowing the latest forex trends then perhaps having a forex expert manage your money is just the thing for you.  Understand first that:
1) even if you decide to diversify and go with forex investing which can make a lot of money, there is considerable risk and;
2) be aware of scams out there perpetrated by seemingly honest forex trading companies.

Here are some things to look for:

• If you’re asked to put down a mortgage, walk away.
• If the forex managed funds guy promises something like 20-30% a month, walk away. In other
  words, if the investment returns sound too good to be true, walk away.
• You should be able to look online at the activity of your account 24-7.
• You should be able to withdraw some or all of your money whenever you want.
• Yes, there are such people as forex hedge fund managers (sometimes called commodity pool operators) who need to be NFA (National Futures Association) members and register with the CFTC (Commodity Futures Trading Commission) although this might not be so for spot forex hedge funds.
• Ask to see a report detailing the latest month of when they had their worst drawdowns (a losing streak
  that depletes your capital).  Every forex investor has drawdowns.
• Ask for as many references as possible of their investors who are content with their returns. 
• How much experience do the managers have at trading forex?  Do they know how to forex trade to begin with?  Is this their specialty?  Text all your contacts in a search engine, including the names of the references.  If anything looks fishy, walk away.
• What is their volume of trading?
• Do they have what is called profit sharing?  This is when your forex account managing company makes you $500 and takes half as their fee.  If so, by the same token, if they lose money, do they replace the half that was lost after a profitable future trade?

What can you expect to invest and what are your returns?  Conservatively, don’t expect to put in less than $10,000 and don’t expect to make more than 3 to 4 percent per month on returns if that.  You should expect a minimum of drawdowns and a maximum of profits.  If you have done your homework and research and feel safe with you account manager, you should leave your money alone to be compounded.  Watch it, don’t touch it but always ask a lot of questions.

While it’s true that professional forex money managers can make more money than the average private retail investor, it pays to trust nothing and no one until you are completely satisfied with your decision.  Again, ask plenty of questions about their fees, systems and trading strategies.  You must also keep in mind that the amount of return on your investment usually has a lot to do with how much you are willing to invest in the first place.  Never invest more than you are willing to lose.

The best account manager is one that you seek out based upon the referral of someone you know and trust.  Educate yourself as much as you can about the forex market.  You may find out, however, that when it comes to forex managed funds, the best managed account is the one that you manage yourself.

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