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The Trading Mesh

5 Tips for Global Investors Looking to Invest and Diversify Their Portfolio Through Currency Investments.

Wed, 22 Aug 2012 09:40:14 GMT           

gold This article was written by a Guest Blogger: Jose “Jay” Molina, the executive director of operations and asset management at Vertical Forex Investments.

As the world’s economy started to face unprecedented challenges more and more investors started to look for ways to protect themselves; several investors started to allocate a portion of their portfolios in precious metals such as gold and silver which are considered to increase in value during an economic turmoil.

Several others turned their attention to alternative asset classes such as oil, futures, and currency investment funds as their way to create a new flow of dividends and increase diversification within their portfolios.

Still there are several investors who do not where to start or how to start. As a guide for investors who are planning to get started or are considering adding a currency investment to their portfolio we have 5 guidelines to help anyone to begin to invest in currencies successfully:

1. Well established currency asset managers tend to perform better.

Invest with well established and recognized money managers only. Avoid any new money managers without provable credibility and experience. The best asset managers tend to be widely recognized and have little to no negative reviews. You should always prefer to invest with a veteran money manager rather than a newbie money manager who might still be learning.

2. Segregation of the funds can offer more protection.

Currency money managers typically offer their services through a third party broker who is the one holding your funds. You simply give trading rights to the money manager while you keep control over your capital.

As part of their brokerage services several foreign exchange brokers can also segregate your funds from their own funds. This can provide you with an extra layer of protection since in the case that your brokerage firm becomes insolvent; your funds will be securely segregated through a third party bank in an account under your name.

3. Invest in currency funds that match your risk tolerance.

It is crucial that you understand the level of risk involved in a currency fund before you start to invest. Everyone is different and knowing your risk tolerance is crucial to succeed as an investor.

Make sure to always invest in funds that will not get you out of your risk comfort zone. For instance, if you are very risk adverse then you should be looking for funds with low drawdowns and steady returns.

4. Define your performance expectations since day one.

Defining your performance expectations should be one of the first steps you take as a foreign currency investor; since you should pick an investment program that matches your expectations and goals. Failing to follow this rule can lead to disappointment or to having false expectations from your money manager.

5. Active monitoring is crucial for success.

As the investor is crucial for you to actively monitor your investment and follow all trading activity in your managed account. This will provide you with a clear idea of how your money manager works and after a few months you will be able to evaluate your manager’s overall performance. Based on your own monitoring and analysis you can decide to increase your investment or to change your money manager. Active monitoring is crucial for success.

As well as the 5 tips above, always keep in mind the rule of thumb of investing in currencies – “Focus in the process rather than in the profits.” Because when the trading in your account is done properly profits are very likely to follow.

About the author

Jose “Jay” Molina is the executive director of operations and asset management at Vertical Forex Investments, a Costa Rican based private wealth asset management company with a focus in foreign currency investments.

Vertical Forex investment’s focus is to offer a professional approach to the currency markets and specializes in managing multimillion portfolios for institutional investors, family offices, high net worth individuals, and private investors globally.

Jay Molina has been active in the asset management arena for several years and has extensive experience in a wide range of fields including private investment consultancy, business development and management, strategy development, and institutional level trading services.

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