The Foreign Exchange Market, Forex, or FX is known as the world’s largest market that accounts an enormous sum of traded money each day. The market is comprised of the various banks, commercial companies, and investment firms. The market allows investors to buy and sell the various currencies of the world. The market’s enormous size has given investors numerous ways to invest in it these include:
- Forex – the market is active 24 hours a day and is where currency pairs are traded. Since currencies are traded in pairs, this means that traders and investors are generally predicting that one of the currency pairs will go up while the other will go down.
- Currency futures – these futures mainly focus on currencies that are bought and sold on a standard size and a settled date.
- Currency options – While currency futures obligates the holder to buy or sell a currency at a specific date, options give their holder the right, minus the obligation, to buy or sell a set amount of currency at an exact price either on or before a set date in the future.
- Exchange-traded funds (ETFs) and exchange-traded notes (ETNs) – there are numerous forex exchange-traded products that provide investors exposure to the various foreign exchange markets available. There are some ETFs that only offer single currency while others offer more than one.
- Certificates of Deposit (CD) – these either come in individual currencies or baskets of currencies, allowing investors to receive interests at foreign rates.
- Foreign Bond Funds – these are bonds that involve the investment of the bonds of foreign governments. The currencies of these bonds are naturally dominated by the country of sale. Should the value of the foreign currency go up in relation to the investor’s local currency, the interest earned will increase on the next conversion.
These are some of the numerous ways one can invest in Forex. But keep in mind that like all investments, there are risks that come with it and you should do your homework to familiarize yourself with these risks.