When most people think of forex, they don’t think about long term investing. In fact, most people think of it as trading, or even more accurately, they think of it as day trading. It’s usually perceived as short term trades for short term gains. But there is indeed a way to invest in the foreign currencies without having to sit in front of a computer screen and micromanage every trade.
You can now invest in forex through currency ETF’s or exchange traded funds. These funds that track certain currencies, but they trade on the major stock exchanges just like any other stock.
The more tradition way of forex investing has been through managed accounts. Investing in a forex managed account is very similar to putting your money in a mutual fund.
You pay a management fee to a money manager to trade your money for you on the currency market. It’s a simple idea. You are letting a seasoned and experienced trader trade on the forex market on your behalf for a fee. Of course, the idea is that you’ll make enough return to cover the management fees.
There are many forex brokers that offer managed accounts. They won’t generally reveal all of their forex trading strategies with you, but they may give you an idea of their approach. Make sure you agree with their trading approach before you put money with them.
In addition, diversify your risk like you would in any market. Put your money into multiple managed accounts if you can afford to do that. Then consolidate on the one or ones that are performing well. That way you are not putting all of your eggs in one basket.
Of course, you could invest in foreign currencies directly if you think there was a long term trend and a given direction. For example, many thought that the Canadian Dollar (CAD) would get stronger as the economy recovered due to a rise in demand for commodities. A situation like that would be conducive to investing in a specific currency for more than short term.
