How To Invest in FX Rates

How To Invest in FX Rates

When people look at investing in currency the first place they look is the forex spot market.  This market is where a lot of forex trading is done, but there are other options that you can look into.  It is best to know about the 5 different ways that a retail investor can participate in the currency market.

A Standard FX Rates Account

The way that most retail traders access the market is through a standard FX rates account with a forex broker.  These accounts are easy to open and available to anyone with an internet connection.  With this account you can trade currency pairs on the market yourself and you are only limited to what you are able to do.

Of course, you have to be careful with this option.  There are a number of scam brokers on the market often based in unregulated countries.  These brokers may let you trade but make it hard to withdraw your money.  You should also be aware of the different strategies you need to employ for trading and the time it takes to master these strategies.

ETN and ETF

There are a number of companies that offer retail traders ETN and ETF’s.  These are exchange traded notes and funds.  These trades are very similar in nature to stocks and where designed to track the movement of currencies in the same way that stock performance is tracked.  Of course, you need to verify what currency you are going to use and how this works for your investment.

Savings accounts and CDs

A Certification of deposit with EverBank is a way to earn money with foreign currency.  The CD will earn interest at the local interest rates and the basket CD has a mixture of different currencies.  There is also the option of getting a foreign currency account which acts in the same way as a money market account and allows transfers between the major currencies.  While CDs are subject to FX rate fluctuations the interest rate is generally higher than dollar CDs.  When you purchase these you can get insurance that protects your investment should the bank you are working with hit insolvency.

Foreign Bond Funds

Buying bonds has long been a way to invest money and these bonds are in foreign governments.  The interest earned with these bonds will be in the foreign currency of the bonds country.  You can make a profit with these bonds when the exchange rate turns in your favour.  There are a number of different foreign bond funds that you can purchase and it is best to research all of them.

Corporations

Buying stocks in multination corporations is an indirect way of participating in foreign currency trading.  Any of the profits these companies make from their overseas investments is boosted by exchange rates.  Many currency traders do not see this as a way of actually investing in currency because you are in fact investing in stocks.

There are 5 different ways that you can invest in currency.  Some of these ways are more direct than others and one of them does not seem to be linked to the forex market at all.

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