Benefits Of Investing In Foreign Currency

Another advantage is that as a result of thi s market size, it would be very hard for a single entity or group to try to manipulate the market

The foreign market is filled with possibilities and this is true in whatever business or industry you find yourself in. The internet, by itself, has exposed us to a global market filled with thousands of our potential clients.

The foreign currency or exchange market also thrives as the biggest and most liquid market in the world. However, while it is alluring to want to “go global”, there are many things to take into consideration.

Likewise, while it is amazing in invest in a foreign currency, it is important to note that each currency comes with its own peculiarities that are quite different from the traditional equity and bond markets as we know it.

Some of these peculiarities could be benefits and others would pose as risks. The investor needs to review these before making the decision to invest in foreign currency. The following are some of the benefits that could accrue to the investor.

Diverse Portfolio

Foreign exchange investments allow you diversify your portfolio. As such, challenges that arise with the economy of your own country can be hedged with another currency or combination of currencies.

Size and Liquidity of the Market

Just as anything that is part of the global village, the foreign currency market is a huge world of opportunities. The foreign exchange market boasts of an average daily volume of over 5 trillion dollars as the amount of trades carried out are no longer restricted to one economy.

As such, the gains that could come from it can be huge. Another advantage is that as a result of this market size, it would be very hard for a single entity or group to try to manipulate the market. As such, you would be able to make more accurate predictions with little surprises.

Lower Costs

When investing in foreign currencies, you would not be required to pay sakes commissions unlike how it is with trading stocks which would be paid to stockbrokers when you buy or sell.

The currency market is free of as investors would only be required to pay the difference between the bid and the ask prices which is paid in the stock market as well.

High Profits

If you have heard anybody talk about forex, then you know it is synonymous with huge profits. The foreign exchange market or the foreign currency market has a high profit potential and these come in a diverse range of ways. The investor can make money from changes in the exchange rate as currencies go up or even down.

24 Hour Market

The market also runs for 24 hours unlike the domestic markets. As such, the investor can react to market events as soon as they occur. You can, thus, trade at your own pace.

These and more are some of the benefits of investing in foreign currencies.

However, there too exist challenges that need to be circumvented. See the next article for the risks or challenges of investing in the foreign exchange or foreign currency market.

Written by Lawretta Egba.