Written by guest contributor Jennifer Gorton from Forex Indicators.
If you haven’t thought of putting some of your paycheck into a savings account, there is no better time to start then now. Having a savings account will provide a cache of money that is stored away in case of emergencies. The money can also be used down the road as a down payment for your dream home or renovations of your current home. At the moment, the interest rates banks are offering are so low that the return you are getting by keeping your money in a savings account is minimal. Even though the return is minimal, your savings will slowly build up over time to a significant sum.
Interest rates that everyone is receiving right now might be just too low to justify keeping your money in a savings account. If you feel this way, there are other options available: there are stock brokers that will allow you to buy and sell stock online, charging little in commission. Some banks even offer their brokerage services that will allow you to make commission free trades up to a certain limit. This is a nice service to have as many investors that do not actively trade enough to warrant opening up another account with a different broker.
Having your checking, savings, and brokerage account all with one company makes transferring funds between your accounts easier. You can still keep some of your money in the savings account while adding small amounts to the brokerage account to buy stock. Buying stocks with higher dividend yields than the current savings interest rate might also appeal to you as an investor. With your money earning more, there might be an added incentive to add more of your paycheck to the brokerage account.
Opening up a foreign exchange account is another alternative to a savings account or buying stock. The foreign currency market, or Forex market as it is referred to, is the largest market available to invest or trade. With over four billion dollars changing hands each day, the currency market is a viable alternative that could produce a higher yield. If you are looking to trade to currency markets, be warned it is not as easy as letting your money sit in a savings account. The price of currencies will move quite substantially throughout the trading day and night. The Forex market is open 24 hours a day 5 days a week, so it is possible to trade or make longer term investments at a time convenient to you. The big swings in price could cause the average investor anxiety as your position might be profitable one moment and showing a loss next.
The big swings, however, are the reason that big profits can be made investing in currencies. All Forex brokers will introduce you to the latest strategies and ideas through training videos. The online retail currency brokers have these videos on their web pages for new investors to watch and learn from. These videos will tell the investor what the best Forex indicators are, and when and how to appropriately use them. There are many indicators out there that will help to predict the future price of the currency. If you utilize this, then these big swings in the price won’t give you as much anxiety because you will be able to understand at what time to close out your positions.
Currency positions can also be used by the more sophisticated investors as a hedge for another open position. Say the investor has bought shares of a company that is paying a high dividend, wants to hold the company for a few years, and then collect the quarterly payments for income. If the company is based in the United States and the market starts to go south, the stock has the potential to lose value.
The investor still wants to hold the stock for the dividend, but would like to make sure that the loss in share price is offset by a gain in another asset. If the U.S. market is going lower because of economic issues, he can then take a short position in the U.S. Dollar. If the U.S. economy weakens and the market continues to go down, the investor will profit from being short the currency of the country. He can then continue to collect his dividend payment without feeling as though his stock position is costing him in the long run. All reputable online brokers have investment advisors that are more than happy to talk to you about investment ideas. Make sure you talk to them so you can be confident that your investment decisions will make you money.