Forex Investment and Currency Trading

If you lack the time, interest, or ability to invest on your own, you can join millions of others who give their money to one of thousands of professional money managers who run mutual funds. Each fund pools all of their clients’ money and invests it according to the general goals and strategies of the fund. By joining forces with many other hard workers who don’t want to manage their own money, you gain power to do more than you can do alone.

They create leverage

Mutual funds let you use your money as though you were a large investor. The combined resources of many small investors give you enough money to purchase more shares and more securities. Buying in large quantities can also lead to better prices and reduced commissions. Most of all, combining forces with other investors gives you the ability to afford to pay for the services of professional money management.

1. You buy. You find a fund with a strategy that’s in lie with your own. You buy some shares in that fund.
2. You pay the price. The price of each share is called the net asset value (NAV). This is the total value of all the fund’s assets minus all its liabilities, then divide by the total number of shares issued by the fund.
3. The price is posted. After the markets close every day, the new value of the assets of the fund is calculated and a new NAV is posted for investors to see.
4. You share the costs. You share the costs of the fund with all other shareholders – the managers’ salaries, operating expenses, legal and accounting costs, promotions, etc. – based on your percentage of ownership in the fund.
5. You share any profits. Your shares entitle you to any profits, which can come in three ways:

• Income earned as dividends – even if the fund invests in bonds that earn interest, your payment is still a dividend;
• Capital gains distributed once a year, even though these gains occur any time the manager sells securities from the fun at a profit;
• If you sell shares at a higher price (NAV) than you paid, you will earn a profit. If you sell at a lower price, you will take a loss.

Finding your fund

Every fund lists a fund objective that corresponds to the three main uses of money: protection, income, and growth (or a combination). This helps you find the right fund for your needs and helps each fund’s mangers make decisions based on what their clients (like you) expect of them. Different funds may use different strategies to try to achieve their objectives. Marketing brochures will give you a sense of these strategies. Some managers make decisions strictly from mathematical models. Others study a company’s business in detail.

Things to know

• Give your money to a pro, and it will be managed using the tools of a pro. Many funds are only required to invest 65% of the money in assets central to the fund’s objective. The other 35% is often used to push for higher returns or limit risks using options, futures, foreign securities, currencies, and a list of other sophisticated investments.
• Unit Investment Trusts are sold in units of $1,000. Unlike mutual funds, they hold a fixed portfolio of securities instead of trading. That makes costs lower, although your money can’t shift out of bad performers or into good ones. They also usually expire after a certain date.