Very often investors are faced with the challenge of deciding which investment package is best for them between the high-risk and low-risk investments. While high-risk investment packages offer the investor a good opportunity to make good returns. Low-risk investments help the investor to protect his capital against all odds in the market while hoping for little profits over time.
To help you understand the advantages of high-risk investment packages over low-risk investment and vice versa, we have used Forex trading to represent the high-risk investments and further used the conservative assets such as Government bonds, fixed deposits, etc, to represent the low-risk investment packages.
What is Forex trading?
Forex trading is one of the high-risk investment packages that allows traders to speculate on the future prices of various financial assets traded which includes: Currencies, Commodities, Stocks, Cryptos, etc, and take positions based on their forecasts. This is made possible through an online trading broker.
What are Conservative Assets?
Conservative assets are low-risk investment packages that offer investors the opportunity to invest in the money market and other investment plans that offers fixed rewards over time.
Best five conservative assets for investors today
• Treasuries: The treasury notes issued by the government could last for 10 to 20 years.
• Government Bonds: Can last up to 20 years or more.
• Money Market Investment: Cash Deposit offered by mutual funds and brokerage firms.
• Fixed deposits: This includes the different savings account with the bank.
• Dividend-offering stocks: Such stocks offer extra incentives over a period for holding them.
Forex trading vs Conservative Assets which is best for you?
Often investors are faced with the challenge of choosing between forex trading and conservative assets. Many traders would prefer forex trading based on the fact that it offers lots of opportunities to make good returns. However, the risk involved in forex trading is so large that the trader could as well lose all his investments over time especially, when he takes the wrong positions in the market with big lotsizes.
Considering this risk that the trader is exposed to in the forex market today, some investors would rather recommend conservative assets as the best investment package for investors. This is because, with conservative assets, the question of losing one’s investment capital is always out of the question as the risk involved is very minimal. The only challenge in choosing conservative assets is that the profit margin over time is very little and often may not suit the investor’s demand. Is this enough reason to choose risky assets?
Advantages of forex trading
• Serves as an investment package for investors.
• Provides an opportunity for making good returns over time.
• Provides an employment opportunity for the trader.
• Used to protect one’s capital against inflation.
Disadvantages of Forex trading
• It is one of the riskiest investment packages today.
• The trader is exposed to losing his entire capital in cases of extreme market volatility when he makes the wrong predictions.
• There is no guarantee for future profits
• Consumes a lot of time and energy in analyzing the market.
• Commissions are charged for trading which reduces the trader’s profits.
Advantages of trading the conservative assets
• Helps the investor to protect his capital while hoping for little profits.
• Reduces the risk the trader is exposed to in the course of his investment.
• Helps investors to spread their investments.
• Serves as a residual source of income to the investor.
Disadvantages of trading the conservative assets today
• The profit margin received is very low.
• Can hardly be used to hedge against inflation due to the little amount expected as profits.