Investing in foreign currency sounds very exotic and will certainly impress some people if you tell them that’s how you invest. It seems like something that only big bankers and international financiers do.
Well, the internet and blockchain have certainly shaken up the finance, banking and investing industries so now even regular people can put their money in currencies.
The best part is that now you don’t need a lot of money to start investing in foreign currency and cryptocurrency is very easy to do.
In this article, I will go over several things to keep in mind if you want to start investing and trading currencies.
Probably the easiest way to invest your money right now is in cryptocurrency like Bitcoin. Buying and selling Bitcoin is easy and cheap and doesn’t require a lot of money up front.
You don’t have to know alot about how the blockchain works but it does help you identify altcoins that you may have a good chance of making quick money with. Bitcoin is always a safe bet as it is always increasing in value. It has had some dips, but if you can be patient through a drop then you should see your money increase again.
If you are looking for a short term investment, then you have to be careful with Bitcoin. With newer coins, there is a better chance of making quick money as they tend to jump in value shortly after their ICO.
Invest with ETFs
If you feel uncomfortable with foreign currency, then you can go for exchange traded funds. You don’t have to go through a foreign exchange broker. If you already have a traditional stockbroker, or would rather go through one, then they can handle those types of trades.
You can manage a portfolio of currencies through tools like swaps and futures contracts. And if a country is in the news for all the wrong reasons, you can play the short game and bet against those currencies.
Benefits and risks of currency trading
The currency trade is the most liquid market in the world.
This liquidity means that currency has a volume of $6 trillion every day. It is also a great way to diversify if all your other investments are linked to the US dollar, which they certainly would be if you are in traditional money markets.
Lastly, the markets are ongoing. Unlike the NYSE, these markets run 24 hours a day. If something is happening at night, you don’t have to risk losing money by waiting for a market to open.
The downsides are that they are open 24 hours per day. Yes, it is a pro and a con at the same time. If some kind of natural disaster were to happen overnight and shake up the market, you won’t know until you wake up. You may have lost money while you were asleep.
There are so many factors that go into the value of money that it can be quite volatile. If you are risk averse this may not be the way to invest for you.