Earning money has never been easy. Spending takes very little effort while earning is no easy feat. However, making sure that an extra amount left for savings is much more difficult, especially if your income is not substantial.
Forex Investment Financial Management
There’s a lot of rising investment options in the market today. They can be divided into very risky ones and safe ones. Risk-taker individuals will opt for forex investments which are on the rise recently. Those who seek security opt for savings accounts.
Investing in Forex has its pros and cons. The decision to take this path of investment depends on the individual’s guts and risk tolerance. Surviving in this type of competitive market takes patience, knowledge, skills, great money management, and a whole lot of other qualities. Many traders often lost all their hard-earned money in this type of investment. The risk is high but with combinations of luck, skills, and knowledge, the returns will be high. As they always say, “the higher the risk, the higher the return.”
Calculate the risks
Knowing the risks in every trade you make is important. It is vital to know if the risks you are taking are proportionate to the profit you are expecting. It is not wise to trade if the risks are so high but your expected profit is low.
Many new traders think that trading a large sum of money will automatically result in high profits. This is a common mistake. The goal of trading in the forex market is to make sure your investment will go a long way and gain steady returns. Many traders fail to understand this because they are too fixated with their ideals and far-fetched goals.
Forex trading is unpredictable. Rates can change anytime. What happens in the past is not guaranteed to happen in the future. It is important to be prepared for unforeseeable price drops and changes. Having precautionary measures and back-up plans are essential to protect your investment.
Stop-loss allows an individual to sell a security when it reaches a particular price. This tool is useful for an individual who isn’t always present in front of the computer. Furthermore, this tool is efficient because it eliminates human emotion which is a hindrance to trading in some instances. It also shields investments from unexpected losses.
When suffering from a long streak of losses, it is wiser to have a break or to lessen your trading size unless you are trading in a high probability-trade. This is important because emotions can provoke an individual in making bad decisions. The current streak is not what matters but the performance of the trade in the long term.
Saving in a Bank or Other Financial Institutions
Meanwhile, for those individuals who prefer security over high returns, their investment choice is a savings account.
A savings account is a deposit in a bank or other financial institution that bears interest at a modest rate.
There are reasons why many people prefer to use this type of investment rather than those that are available in the market today.
First, there are no risks while earning interest. A lot of investments in the market today sometimes involve higher risks and a lot of uncertainties. Savings accounts offer assurance and security while earning interest. Furthermore, the money saved in the savings account can still be withdrawn anytime. This kind of feature is what is missing on the other types of investments, so it is wise to put your money you don’t need now but may need shortly.
Although it has a lot of appealing features, savings accounts have its drawbacks- mainly its small interest rates. Its availability is also a double-edged sword. Although it is nice to have access to your money, it is prone to the temptation of being spent which defeats the purpose of saving. Thus, saving accounts is only good for sums of money that will be used in the next month or in times of emergencies.
It could be inferred that using a savings account for long term investments is not wise because of its small interest rates. There are other types of investments that offer higher interest rates but not disregarding its sense of security such as treasury bills, money market funds, and certificates of deposit.
Choosing forex investment or savings account is a matter of discretion of the investor depending on his purpose, means, and risk tolerance. It is important to know the savings goal beforehand and investor’s risk tolerance because it will lead to the most suitable investment choice; because, no matter what, each type of investment has its pros and cons. It is only a matter on which of these pros are more beneficial to an investor and which of these cons are worth looking over for.