Forex investment portfolio

Forex investment portfolio is important to any investor in the forex market. Traders that are new to the forex market are advised to establish portfolios for their investments. Establishing the investment portfolio will enable the investor keep track of the trading strategies employed to increase the probability of gaining in the market. Forex investment portfolio, which is usually managed by the investor that owns it, simply means investing in different assets for diversified risks.

FEATURES OF INVESTMENT PORTFOLIO

When the trader sets up investment portfolios it's important to have these features. It should be able to diversify as to increase the profit margin of the investor. The features could be any of the following;

  • Diversification of portfolio:  The diversification of the investment portfolio is important as to increasing the profit gains of the investor.

  • Portfolio manager: The investor has to employ a portfolio manager who can double as portfolio adviser to deal with the assets/funds. It is important for traders who don't get to place regular trades on the FX market.

  • Commodity trading: it's important for portfolio's to include commodities and CFDS. Commodity trading also helps the trader to diversify the investment portfolio.

HOW TO HEDGE YOUR PORTFOLIO

Hedging is the strategy of reducing the risk of wrong price movements for assets traded. The strategies can be impressive in dealing with single stock position but when it's involves the whole portfolio's. The following are ways of protecting your portfolio;

  • The first phase in hedging your portfolio is to get to know the hedge strategy to take. The hedge's that appreciate in value enough to offset the depreciation in the portfolio value during the market decline, it should also save the value of the portfolio regardless of the severity of the sell-off.

  • Get to know how much to pay to hedge the portfolio: depending on the high rate of the market decline it's only wise to pay more to protect your portfolio from declining with the market. There are a number of hedge funds to choose from so the trader is at liberty to scout around.

TYPES OF PORTFOLIO

There are different types of forex portfolio available to traders. In some cases, these portfolios are grouped into three; while in other cases, they are grouped into four. In this case, we will make a bit of reference to the three different types of forex portfolios. They are as follows

  • Aggressive portfolio

  • Balanced portfolio

  • Conservative portfolio

The aggressive portfolio or the high risk portfolio is the most profitable of them all; but as is always the case in the forex market, anything that presents high profitability also come with high risk. In the balance portfolio, risks are low and profits are moderate. Conservative portfolio is one with low profit ad low risk assets.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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