Foreign Exchange Managed Accounts Advantages And Disadvantages
A lot of people want to get their share of the 3 trillion dollars per day Foreign exchange market pie. It can be done in many ways: trade yourself or let someone else get it done for you. Let us say you don’t want to do this yourself. How would you let somebody else trade on your behalf without giving them your money?
The answer is having a Forex Managed Account. This is a forex account into which you deposit a sum of money, usually $5,000 and upwards and you give your account managed, a professional investor, a limited power of attorney. This manager is then able to trade with your money according to their discretion. However, they don’t have control over your money as they can’t withdraw funds out of your account. They can trade with your money but never take it for themselves.
Naturally, there are several benefits to Forex managed accounts as well as some downsides which you should think about before signing for one. Let’s go over some of the positives and negatives involved.
Pros:
- Someone else does the trading for you so you don’t have to spend time on it. There are also accounts which are traded with automatic systems which may perform better or are able to trade around the clock, which a human being certainly can’t.
- The forex account manager is a professional in the field, while you may not have a clue on how the foreign exchange market really works. This may give you a greater chance of watching your money grow and grow.
- With many Forex managed accounts, you can see your balance at any given time. The money is liquid and can be withdrawn whenever you want.
Cons:
- You need to be doubly sure that the person or firm who managed your funds know what they’re doing. In the end, the recent financial meltdown has shown that even the pros fail miserably at times. Not all companies are good so you will have to do your research.
- This is a service and it costs money. You must make sure that this firm makes you a handsome profit, enough to pay them their fee and get a good return for yourself.
- If you are an independent trader, you can usually start with as little as a $100. For a managed account, you will need much more. I’ve not seen anyone accepting new accounts at less than $5,000, a big investment for many people.
I recommend learning as much as you can about Forex, even if you do plan on getting a managed account. It will help you select a better managing firm, and who knows, you may end up as a trader yourself.