Managed accounts, especially the ones that trade currencies, provide investors with many advantages. Here are some:
List of Account Benefits When it Comes to Managed Forex
- Low Minimum Investment – While some hedge funds and separately managed accounts that use traditional asset classes like stocks and bonds cater only to High Net Worth (HNW) investors. Many managed FX product providers give the everyday investor an opportunity to participate with a minimum of US$5,000 to US$25,000 level.
- More Transparent Model – A managed account allows an investor to have the account in his name and directly own a portion of the investments being traded. This is unlike a mutual fund or hedge fund, where investors own shares in the fund entity.
- Excellent Liquidity – Managed FX accounts trade currencies. The foreign exchange market is the largest financial market in the world; larger than all of the stock markets combined in terms of trading volume (liquidity). This allows a skilled trader to get in and out of positions a lot faster and with a lot more ease than in traditional markets. This makes forex a much easier asset class for a skilled money manager to work.
- Tax Advantages for Certain Investors – Some countries tax the currency transactions that occur in a managed account favorably. Despite recent enactment of unfavorable regulations by the United States of America, the U.S. is an example of a country that currently has beneficial FX tax laws for US-based investors (see our taxes page for more information).
- Diversification – Forex managed Accounts add an extra level of diversification to an investment portfolio. Foreign currencies move differently than traditional investments like stocks and bonds. As a result, managed FX is uncorrelated to typical investment products. This advantage means that as the majority of stocks, real estate, and other economically sensitive investments are depreciating during an economic downturn, a profitable managed FX product with good risk-management can weather the storm. This benefit is a huge plus for any investor.