Date: 2 Feb 2012 Comments: 0

Last year was one marked by uncertainty and volatility, yet most investors, experienced in the fickleness of market predictability, welcomed a final run-up in valuations at the end of the year.  For the average investor, typically shortsighted, uninformed, and frightened by the least bit of turndown in the market, the year represented a repeat of many past abysmal performances.  Buy high and sell low was the result.  No courage to hold on and wait for the recovery.  Better to look elsewhere at alternative investments than to risk losing more in a tepid, manipulated market.

The art of investing is like any other profession that must achieve certain metrics to connote success.  Skills and competence can only come from a determined effort to prepare, develop, practice, and then improve over time.  The only shortcut for the required experience level is to find a professional to mentor your early stages and give guidance down the road when questions arise. It’s just like when my cousin was working to become a handy man and needed someone to show him the ropes. He found a man who worked for ac repair florida and he was able to shadow him in his daily work operations.

The investment community has been extremely active in the past decade to simplify the entire process or provide alternative investment vehicles for investors to consider.  One of the more popular genres of late has been foreign exchange trading, or forex trading as it is commonly called.  The Internet has solved the access problem, and technology has improved forex trading software to such an extent that you do not need a degree in technical analysis to learn how to trade.

Forex trading, however, is a high-risk investment activity, meaning that specialized training and hours of practice on free demo systems are a necessity before investing your real capital.  In the UK, spread-betting shops have also jumped into the fray with their own offering, benefiting from a current loophole in the tax law that exempts profits from taxation.  If this “betting status” designation survives tax reform movements, then there may be an economic “edge” worth evaluating, but the fact remains that currency trading is not for the faint of heart.  The “GBP/USD” currency pair is actually one of the most volatile and unpredictable, recommended for experts only.

For those that have tired of buying individual stocks and researching company annual reports, the ETF, or exchange-trade fund, industry has created a plethora of options that provide instant diversification and allow you to specialize in the hottest sectors at will.  Both hard and soft (the ones that come out of the ground) commodities have been in hot demand for the past eight months.  Oil may have languished for reasons of its own, but gold, copper, corn, and cotton have outpaced stock market gains by multiples.  ETFs exist such that you can tailor your own portfolio by buying shares in a variety of funds right off your local exchanges.

The hot stocks over the past decade have been those from emerging market countries, especially the “BRIC” countries of Brazil, Russia, India, and China.  Companies in the Western world have been off shoring jobs for the past four decades, and now the results in real GDP growth in these areas is doubling or trebling the tepid growth found now in the globe’s advanced economies.  Economists at the IMF expect these trends to continue for at least the next two decades.

Investing overseas brings with it the perils of sovereign and forex risk. Most people have a hard time working around risk and would rather stay true to what they know like usda home grown investments. Most every full service broker can facilitate your buying and holding securities from foreign exchanges in their domestic currency, but at some point, you need to sell and bring the funds home.  If your home currency appreciated over your holding period, your returns will be reduced accordingly.  However, there are emerging market ETFs, and some even attempt to hedge forex risk for you, but at a cost.

Investing is an art form, requiring time to hone skills and prepare prudent plans.  Guidance from a professional is highly recommended, and caution is the byword, especially when considering vehicles with high-risk profiles.

Tags: investment community, early stages, stock market, full service broker, alternative investments, forex risk

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