Forex Managed Accounts - Are They Worth It?
A relatively recent innovation to forex markets are forex managed accounts. They came about with the emergence of foreign exchange as an investor asset class rather than just a currency that companies and individuals needed to exchange for another. In a nutshell, you hand some of your money to a forex expert who will manage it on your behalf with the objective of making you money.
In exchange for doing this the forex account manager will take a cut of the profits, usually as high at 30-50%. By the way, you may think this is high especially compared to more traditional mutual funds, etc but you can argue that you want the money manager to be very motivated to make you money hence it makes sense for him to have a good share of the profits. In other words, if you were to give him only 5% of the profits and if he is really good why would he do this for you? He would rather trade the forex markets for himself and pocket it 100% of the money!
So that partially answers the question - they are worth it, even if you have to pay away a large portion of the profits. There is a second element that makes it or brakes it when it comes to forex managed accounts. And that is risk limits.
These accounts are worth investing in as long as you have a clear view of what the investment mandate limits for the account manager are and you can monitor them closely. Especially if the manager is new (to the market or to you), you want to make sure you understand clearly what he can or cannot do. This has two advantages. The first is that you make sure he is not doing silly things with your money or investing in products that you don't want him to. The second, less obvious advantage, is that if you have transparency over his trades with your money you can learn from him should you want to trade some forex on your own account later down the line.
Forex managed accounts are a valuable innovation to currency markets and are worth looking into if you are looking to profit from currency markets. Make sure you pay the manager well and you understand what he is doing before giving him any of your hard-earned money.
Posted on: 1/19/2017