Planning for your retirement can be an uphill battle often needing a careful analysis of what investment strategies you need to pursue. With proper retirement planning, you may still have a quality life; however, there may be no guarantee that any investment option you decide to mull over is not going to have setbacks.
Forex trading remains a viable option for retirees who would like to earn themselves something to support them during the golden days.
While forex trading may be a tedious task due to the increasing volatility of the market, it is still one of the smart choices for people seeking for post-retirement investment strategies.
Below are seven reasons that paint a clear picture of what the shares and exchange markets have for you as an investor seeking for a retirement investment option:
1. Low investment capital
How much do you need to open up the smallest “meaningful” business today? Twenty thousand or thirty thousand dollars? Well, it comes as a good surprise that in the forex market, you only need about $250 to start and run a fully functional business.
Of course, the return is low for a $250 investment, but it is still interesting that you can get a profit on such an amount. The more you increase your investment, the higher your profit margins, and therefore putting something like $2000 in a forex trading account is enough to earn you something meaningful.
It is also good to note that your expenses to earnings ratio lowers as you invest more. The main expenses in this market include taxes and account fees.
Some brokerage firms, however, do not charge any fees at all on account maintenance; rather, they benefit from the spread they receive when they sell you a currency. In essence, they are traders offering you a shop to run on the condition that they become your suppliers.
There are ranges of flexibility in the market that you might take advantage of in the FX trade. First is the wide choice of currency combinations: you are free to deal in different currencies, so that if you do not like holding your money in one form, you simply convert it to another. In addition, you may decide to run your business yourself or leave it in the hands of a more experienced person.
The cost of employing a broker is not high because they don’t work for you alone. A reputable broker conducts transactions on behalf of many people and, so you only get to handle a fraction of their salary.
If you like, you can also channel your money to hedge funds and so avoid handling it yourself or giving it to an individual broker. Bigger institutions enjoy the benefits of economies of scale, and so have access to more experts and high-end technology.
3. 70 percent chances of winning
According to a recent report by S&P 500, people who invest in the forex and stocks markets smartly earn a return over 70 percent of the time. No other area of investment has that much level of assurance, not even the fixed income investments.
However, forex trading presents some risk and those investing in the market should check on what amount they are willing to risk. Starting with a small amount can be a good bet for new comers. Don’t trade with all the amount in your trading account at any one given time, use a fraction of it to trade.
4. A free market
The foreign exchange market has been recognized as the closest representation of a free market. There are many factors that define what makes a free market. One of them is that there are no barriers to new entrants.
Anybody can engage in FX trade regardless of their knowledge base, background, and residence; and as we have seen earlier, even its minimum initial capital requirement is quite minimal.
That said, it would be disastrous to engage directly in buying and selling currencies if you do not have adequate knowledge. To be safe, you need to use a representative who has the right trading strategy. As pointed out earlier, this may be an individual broker or organizations like hedge funds.
5. Lots of information
If you want to learn about the forex market even after retirement, there is an opportunity to do so without incurring any costs. With the availability of the internet today, there are lots of structured training materials online that start by introducing you to the stock market terminologies and build on the knowledge as you proceed. Most of these courses are offered free and you can learn at your own pace.
While you can stop the training whenever you like and proceed to start selling and buying, you stand better chances of overcoming newcomer’s difficulties by going through the whole process.
Many online brokerage firms will also provide you with a demo account where you are placed in the real market environment but you are given virtual or imaginary currencies. You then use the available information to execute calls and bids, and at the end, see how much you would have made if you were trading with real money.
To enable you to assess your lifestyle and determine factors that may contribute to your success or failure in this kind of trade, online market tutors may use the data collected from your demo account to advise you on which habits to adopt or abandon.
Once you feel that you have trained enough, you can then proceed to the real trade. Some people take months to gain confidence, while others will only get around the entire process in weeks or days. In a real sense however, nobody is a complete expert in the stock market; one individual is just better than another is, and most times, expertise increases with more years of experience.
People who have thirst for information and those who are aware of the global events are also more likely to succeed in this trade. You will therefore need to inculcate a news junkie lifestyle to get an edge.
6. Cushion against inflation
Inflation can render the money that you have kept in a bank for years worthless. Even with a savings account, banks tend to pay very low interests, which at times cannot cope up with the rising inflation.
Therefore, although you will get more (paper) money from the savings that you are currently making in the future, its value may remain flat or even reduce if the rate of inflation increases.
To avoid this situation, the stock market is a better alternative. This is because the average values of stocks continually rise to keep up with inflation. You stand a chance of retaining the current value of your money for decades if you invest it in shares than leaving it idle in a bank.
By engaging in forex trading, you will also be able to retain the value of your money while earning a profit from it. If your holding currency starts depreciating, you can simply convert the money to a more stable currency and shield yourself from the effects of inflation. Many investors, for instance, store their money in either US dollars or the Euro, because these are more stable.
What to watch out for
There are however a few encumbrances when it comes to forex trading. As a trader, you might end up losing your capital especially in the highly leveraged trade if you aren’t far-sighted in your trading strategies and choices.
Before you invest in forex trading, you need to take time to educate yourself on the basics and do practice using demo accounts to test your strategies. Don’t just plunge into this trading activity immediately after retirement. Take some time and learn the ins and outs of the game.