Forex Funds | Forex Managed Funds | Forex Hedge Funds

You don't have to become a day trader to get in on the forex market action. In fact, there are many options for investors who want to get in the game but don't have the time or desire to sit in front of a computer all day. One of those options are investing in forex funds, of which there are many varieties.

There are many kinds of fund options for forex investors. You can invest in a forex managed fund, hedge fund or a variety of mutual, index and exchange traded funds (ETFs). All of these have it's own unique sets of benefits.

Forex trading is a very involved process. It requires you to really have an intimate understanding of the markets. And not just currencies. Forex traders need to know how stock markets, bond markets and other world exchanges affect currencies.  By investing in a forex fund, you skip this intensive learning process that few actually master.

The most popular form of forex investing is getting in on a forex managed fund. This is very similar to a mutual fund in that you place your money with a money manager and he trades your money for you.

Many brokers have their own proprietary trading methods, systems and platforms that you get to benefit from by placing your money with their managed fund. In addition, you get the added benefit of having an experienced currency trader execute trades on your behalf.

Although most forex brokers who offer managed accounts don't reveal exactly their forex trading strategies, many can offer you a glimpse of their overall approach. They do this first of all so you don't have to blindly entrust your money into a black box. They also do this to offer you options on which approach you would like.

Forex Hedge Funds

Another type of fund you can invest in are forex hedge funds. This method of investing is reserved for the wealthy. Most individual retail investors usually don't have access to these funds. Hedge funds enjoy relatively low regulation by government securities agencies. They are able to do that because hedge funds require a minimum net worth that is relatively high to even be allowed in.

The assumption is that the wealth don't need as much protection from the government as lower net worth investors. It is assumed that the wealthy are better able to fend for themselves on Wall Street. The other assumption is that they can afford to lose a lot of money and not go broke.

Forex ETFs

You can also invest in foreign currencies through a relatively new type of fund, the exchange traded fund, also known as ETFs. These funds are traded on the open exchange just like a normal stock. Each ETF is a basket of securities, just like a mutual fund.

The main differences is that you don't have the high management fees like a mutual fund. The cost of an ETF is whatever your trading commission is for trading stocks. In addition, you can trade ETFs throughout the day instead of once at the end of the day like mutual funds.

Forex ETFs typically track a particular currency index to decide what goes in it's basket. This accentuates one of the advantages to forex ETFs. The fact that it follows indices of different currencies allows you to make a forex profit in any market environment.

For example, whenever the global economy tanks, the world runs to the USD. During a time like this or if you can smell it coming, you can invest in an ETF that tracks a US dollar index. If you see that a recovery is coming, you can bet on the fact that the USD will decline and other currencies, especially those in emerging markets and commodity rich countries will be on the rise. In this case you can then buy ETFs that track currencies in those markets.