Conservative investment theory encourages new investors to be as diversified as possible, often through index mutual funds and ETFs which represent entire markets – thousands of companies represented by each. On the other hand, this is not a very good way to make money quickly. Index funds grow with the speed of glacial migration. They can go up and down in value pretty quickly, but large and lasting changes happen across years and decades, not months or weeks.
Currencies and individual company shares, on the other hand, jump around in value a whole lot quicker. As such, investors who get involved in these markets can see a lot of return (or loss) on an investment in no time at all. There’s a lot more risk involved, of course, but for the right investor equipped with the proper knowledge base, there is great opportunity for speedy returns. There is also the option of Forex trading, through brokerage sources like 70trades. Here investors merely speculate on the future value of assets like currencies, stocks, and indices, without actually owning the options in question. There are tons of options, but we’ll try to make sense of it all below.
When to Trade on the Forex Markets
The Forex market is a unique investment option because it doesn’t involve ownership of the assets in question. In order to build a valuable traditional investment portfolio, an investor has to put down a whole lot of money to buy up actual shares of companies and what have you. Forex investors invest money that will entitle them to commisions/returns if they accurately predict that an asset (currency, stock, index, etc.) will grow or decline in value, at the end of a set period of time.
Forex is great for people who don’t have enough money for a large, diverse ownership portfolio. Forex trading is fast-paced. The educated Forex investor can earn money very quickly, though the risk for losses is, of course, greatly present.
When to Invest in Shares and Indices
Shares and Indexes are all about ownership. Unlike Forex trading, described above, the investor will actually own the assets in question, often tiny portions of the many companies publicly traded. When it comes to deciding whether to buy up indices or individual stocks, the investor has to make honest judgments about their own commitment and capabilities.
People who trade individual stocks must know a lot about the companies they are invested in, as well as the industries in which they dwell. Individual stocks are much more fluid in value than indices, specifically because as certain companies contained within indices fail they are replaced by new, successful companies.
Individual stocks also have the ability to grow much faster than indices, because low-performing companies contained within indices negate the growth potential of the overall index (either an ETF or mutual fund). People who invest in stocks need to be much more educated and involved in the companies/asset classes in which they are invested – much more so than the index fund investor who relies on the composition of the fund rather than the strength of any one company.
The Last Word on Forex, Stocks, and Indices
There is no “Right way to invest”, but there are lots of wrong ways. For the new investor, it’s important to gain knowledge and choose investment type carefully. New investors without a great amount of capital can see incredible returns using Forex, while inheriting a lot of experience and knowledge that will serve them well in all other forms.
For investors with plenty of money to invest already, stocks and indices can be a great choice. Individual stocks are a great option for people willing to do the hard work of learning about companies and market forces (just as Forex can be), while indices can provide a lot of passive growth and diversification for people not as involved in the nuts and bolts of investment.