Foreign Exchange Hedge Funds

Written by Josh Dodes
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For decades, foreign exchange hedge funds were the exclusive province of major entities working through major commercial and investment banks. While traditional hedge funds have long offered smaller investors the opportunity to grow money aggressively, even the best such funds cannot hope to match the advantages of those funds tied to foreign currency exchange. Understanding why this is the case depends upon a clear understanding of what the best forex funds have to offer.

In an increasingly online world, the forex's lack of a physical location or central exchange presents a unique advantage: the capacity for 24-hour activity during the work week. While such a schedule (or lack thereof) offers investors the benefit of following the market on their own schedule, more impressive still is the fundamental flexibility such a schedule accords forex funds themselves. If a significant event occurs or significant data emerges on the other side of the world, top fund managers can react in real time.

The Diversity of Foreign Exchange Hedge Funds

Perhaps even more important, foreign exchange hedge funds offer investors a wider potential for risk diversification than most hedge funds or mutual funds can hope to match. After all, the kind of cross-sector diversification germane to traditional hedge funds provides little protection from economy-wide volatility. By diversifying your holdings on a worldwide basis, however, top foreign exchange hedge funds can provide an additional level of protection from short-term losses.

With the foreign exchange market finally opened to smaller investors over the last several years, it is no wonder that so many such investors have leapt at the chance to grow their money in this unique way. Could such a market fit your long-term needs? I encourage you to carefully research all of your options, and to choose an investment environment in which you feel both comfortable and confident.


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