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If you been scouting finance and investing sites, you may notice forex ads. They are everywhere and some of them claim you can get rich quick on them.
My advice is to ignore sites who throw that out and instead focus on understanding how the currency exchange works so you can decide if it's a legitimate way to invest.
What is Forex Investing?
First off when people mention forex or trading forex, they're usually referring to the foreign exchange market.
Since it’s not tied to a particular stock market it's available 24 hours a day. The idea behind forex is investors trade one currency for another to make a profit with the transaction.
Weighing the Pros and Cons of Foreign Currency
Buying and selling currency is not for something you want to jump into simply because it looks like a good idea.
Your hard earn money deserves to be invested wisely. Like any investment, knowledge is power.
There are resources like Investopedia that can give you a tutorial on investing in foreign currencies.
You also have to remember that there are no guarantees on any investments, so be smart with what you put in.
Should You Include Forex in Your Portfolio?
Before you look at investing in forex, there are some questions you two should discuss:
- How are our portfolios doing? It pays to have a clear idea of where you are now. Are you investing enough so you can retire? Focus on getting your contributions up before you look at using forex to catch up.
- What is our target asset allocation? If you two haven't already, make sure you have established your asset allocation. You can set aside a portion of your portfolio for new investment ideas, but don't sacrifice your nest egg on something you're learning.
- How will forex fit into our overall strategy? I know it can be exciting to add new things into the mix, but make sure you're are certain that it makes sense for your strategy. Currency investing usually means a lot of trading so if you're a buy and hold kind of investor, you may want to rethink.
Once you have your answers, then it becomes easier to decide what is the right choice for you.
If you do feel like forex trading is something you want to try out, set aside a small percentage to test the waters.
Better to lose a little while you learn, rather than a big chunk of your nest egg.
As always, never invest money you don't have. Too many people have used credit lines to trade more that than get afford.
Thoughts on Forex Investing
I'd love to get your thoughts if you're investing with currencies. What's your strategy? How do you research? What resources have helped you?