Basics of Asset Management
Most people, at some point in their lives, become interested in the idea of trading stocks, commodities or Forex markets for high profits to achieve financial freedom and independence. However, getting to this point is anything but an overnight process. Instead, it can take a great deal of effort, time and research. Because of this, many people turn to asset management as a method of allowing financial professionals to execute their trades for them. Let’s briefly take a look at what financial asset management is, how it works and how it can be used to create long term financial success.
What is Asset Management?
In broader terms, asset management is merely the use of a third party individual or service to handle the operation of any financial asset. Real estate investors who use property management companies, for example, are employing a type of asset management strategy. In the more focused view of trading Forex markets, however, asset management involves the use of a third party to execute trades on your behalf. Asset managers will set an account up in your name with money supplied by you and execute trades, allowing you to profit without having to invest your time in trading.
How Does Forex Asset Management Work?
When using an asset management firm in the Forex market, traders allow their asset managers to make decisions about the trades that are executed. These managers use their own analytical techniques and strategies to trade profitably at a reasonable risk level. Most asset management firms charge a fee that is based on the returns that they earn for traders, though some do offer the service without fees, instead paying for their services via rebates from selected Forex trading platforms. In this case, a trader’s money itself is the tool that is used to pay for its management.
Of course, traders are always allowed to see what is being done with the money that they invest through an asset management firm. Most firms will supply traders with a read-only version of their account login on the Forex brokerage that the management company uses. This gives traders constant access to the real time trading data pertinent to the trades that are being made in their name and with their money.
Advantages and Disadvantages of Using a Forex Asset Manager
Clearly, there are some fairly significant advantages to using the expertise of an asset management firm in Forex trading. Money that is invested using such a service can simply be allowed to grow consistently without the capital investor having to do any of the work. Another advantage to this strategy is that it allows people with time consuming professions to put their money into the Forex market without having to take the additional time necessary to manage it.
There is only one significant drawback to the use of an asset management company. As a general rule, Forex markets are thought of as an easily accessible financial arena for investors without large amounts of capital due to the traditionally high leverages that are offered by most brokers. Asset management firms, however, do not follow this same trend. Most asset management companies will require a very large minimum trading balance, in some cases as high as $10,000. For those who are unable to invest this kind of money, social trading is another method of making use of the expertise of experienced traders with a much smaller capital investment.
How to Use Asset Management
Financial asset management in the Forex market can be used in one of two ways. The first is simply to allow the initial investment put into the hands of the management firm to grow continuously. This kind of trading typically offers much higher rates of return than stocks, bonds or savings accounts. For someone looking to make his or her money grow in the most efficient and profitable way over the long term, this is the best use of an asset manager.
The other way that investors can use Forex asset management is to create a steady stream of income from the profits made through trading. Much in the same way that dividend paying stocks can be used to create a steady income stream, the profits from managed Forex accounts can be withdrawn at any time an investor wants, leaving the principal investment in the account for further trading. Many who make use of managed accounts switch to this model after a few years of allowing their money to grow without withdrawals, since this leaves a much larger trading principal and therefore results in larger annual profits.
Financial asset management is an excellent option for those interested in the Forex market who simply do not have the time or the inclination to trade on their own. While it does require a relatively large initial investment, it is one of the safest ways to profit consistently in the Forex market. For those looking to use Forex revenues as part of a long term financial growth strategy, asset management is one of the best tools available.