Investing in any market or asset class is a serious business and requires serious consideration and due diligence. Here are some vitally important points you need to take into account when deciding on where to invest in any managed forex fund.
The Company
Obviously before you send your hard earned money off to a foreign land it is essential that you know exactly who it is you are dealing with, where are they based and who is your point of contact at the business in question. They need to be able to make themselves available to you at short notice to answer any questions or concerns you might have.
Starting Balance Requirements
At the start of the investment process you need to make an honest assessment about just how much risk capital you have to invest in a managed forex account. Do not be tempted to over extend yourself or borrow money to invest. Risk capital by definition is money you can afford to lose without it effecting your lifestyle. Be realistic about how much you can invest and find a suitable managed account provider whose starting capital requirement is compatible with your own. Not always easy but you will need to look.
Historical Performance
There is no doubt that the first thing you usually look for in a managed account provider is their results. It is tempting to look for the highest monthly profit figures you can find and go with them. But like everything in this world if the figures look too good to be true then they probably are. Getting long term sustainable profits simply isn't compatible with getting big monthly returns. No matter what the provider tells you, big returns equals big risk. Making 50% a month and then losing it the next month isn't a sustainable approach to investment eventually the draw down will get you, almost like one of the laws of physics.
Management Fees and Commissions
You also need to consider what the costs of doing business are to you the investor. How is the money manager being remunerated? Do they have an annual percentage fee, a fee based on trade turnover or do they take a percentage of profit per month or perhaps they even have all 3? These questions can have a profound effect on exactly how much you get to take home at the end of the month. If a trader makes a commission based on trade volume, or the number of lots he trades per month, it is possible they can simply be making money "churning" accounts whilst making little actual profit. This is also associated with "over trading". Many forex managed funds also carry an annual percentage fee based on the account balance. You need to looks for a managed account where the money managers are rewarded for their results, so paying a percentage of new profits on a monthly basis is fair. The exact percentage will usually vary from 15 to 35% of new profits. I would be very reluctant to pay a greater percentage than this.
Control of Funds
Make certain that your provider gives you absolute control of your own funds at all time. The account should be opened in your own name, or that of your chosen company name. All monies should be sent directly to the account of a registered and regulated brokerage house rather than the provider themselves. There should be no exception this. Any bona fide managed forex provider will ensure that you are provided with an "LPOA" or "Limited Power of Attorney" to sign that allows them to only execute trades on the account and nothing more.
Total Capital Under Management
How much money do they have in trade? A well established and growing capital base is a good indication of just how good a money manager is. If a fund or managed account program is well capitalized it is a fair indication that astute investors with larger accounts are sufficiently satisfied of the funds long term prospects and its investment philosophy.
Trading Strategy
Give some serious consideration to the trading strategy employed by the forex managed account provider. Satisfy yourself that their trading style and their money management is consistent with your own risk tolerance and make sure that the provider does actually trade according to the guidelines they stipulate. Often you will see providers claiming to risk 1% per trade and actually using 10 or 20% risk per trade whilst trying to recover from losses. This is a very dangerous practice so make sure you are aware of the methodology used and that they comply with it.
Broker
Don't overlook the role that the broker plays in the overall managed account process. A good, responsive broker can make a huge difference to whether or not you have a favorable outcome from your managed forex experience. Do some due diligence on the broker recommended by your provider and make sure that they are able to offer competitive spreads and fees and also give you fast and accurate trade execution and speedy deposits and withdrawals. If they take weeks to process transactions this can end up costing you a lot in terms of time and lost trading opportunities. - 22871
The Company
Obviously before you send your hard earned money off to a foreign land it is essential that you know exactly who it is you are dealing with, where are they based and who is your point of contact at the business in question. They need to be able to make themselves available to you at short notice to answer any questions or concerns you might have.
Starting Balance Requirements
At the start of the investment process you need to make an honest assessment about just how much risk capital you have to invest in a managed forex account. Do not be tempted to over extend yourself or borrow money to invest. Risk capital by definition is money you can afford to lose without it effecting your lifestyle. Be realistic about how much you can invest and find a suitable managed account provider whose starting capital requirement is compatible with your own. Not always easy but you will need to look.
Historical Performance
There is no doubt that the first thing you usually look for in a managed account provider is their results. It is tempting to look for the highest monthly profit figures you can find and go with them. But like everything in this world if the figures look too good to be true then they probably are. Getting long term sustainable profits simply isn't compatible with getting big monthly returns. No matter what the provider tells you, big returns equals big risk. Making 50% a month and then losing it the next month isn't a sustainable approach to investment eventually the draw down will get you, almost like one of the laws of physics.
Management Fees and Commissions
You also need to consider what the costs of doing business are to you the investor. How is the money manager being remunerated? Do they have an annual percentage fee, a fee based on trade turnover or do they take a percentage of profit per month or perhaps they even have all 3? These questions can have a profound effect on exactly how much you get to take home at the end of the month. If a trader makes a commission based on trade volume, or the number of lots he trades per month, it is possible they can simply be making money "churning" accounts whilst making little actual profit. This is also associated with "over trading". Many forex managed funds also carry an annual percentage fee based on the account balance. You need to looks for a managed account where the money managers are rewarded for their results, so paying a percentage of new profits on a monthly basis is fair. The exact percentage will usually vary from 15 to 35% of new profits. I would be very reluctant to pay a greater percentage than this.
Control of Funds
Make certain that your provider gives you absolute control of your own funds at all time. The account should be opened in your own name, or that of your chosen company name. All monies should be sent directly to the account of a registered and regulated brokerage house rather than the provider themselves. There should be no exception this. Any bona fide managed forex provider will ensure that you are provided with an "LPOA" or "Limited Power of Attorney" to sign that allows them to only execute trades on the account and nothing more.
Total Capital Under Management
How much money do they have in trade? A well established and growing capital base is a good indication of just how good a money manager is. If a fund or managed account program is well capitalized it is a fair indication that astute investors with larger accounts are sufficiently satisfied of the funds long term prospects and its investment philosophy.
Trading Strategy
Give some serious consideration to the trading strategy employed by the forex managed account provider. Satisfy yourself that their trading style and their money management is consistent with your own risk tolerance and make sure that the provider does actually trade according to the guidelines they stipulate. Often you will see providers claiming to risk 1% per trade and actually using 10 or 20% risk per trade whilst trying to recover from losses. This is a very dangerous practice so make sure you are aware of the methodology used and that they comply with it.
Broker
Don't overlook the role that the broker plays in the overall managed account process. A good, responsive broker can make a huge difference to whether or not you have a favorable outcome from your managed forex experience. Do some due diligence on the broker recommended by your provider and make sure that they are able to offer competitive spreads and fees and also give you fast and accurate trade execution and speedy deposits and withdrawals. If they take weeks to process transactions this can end up costing you a lot in terms of time and lost trading opportunities. - 22871
About the Author:
For more information regarding Managed Forex Performance. Brendan is also associated with Managed Forex Performance. Managed Forex Trader provides information and services to people interested in investing in Forex this can be viewed at High ROI Forex Accounts.
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