Forex just another asset ?

Most who are familiar with the Strategic Asset Allocation (SAA) would also understand that most, investors rely on this strategy, whether they know it or not, this is how the bulk of financial advice is delivered when it comes to allocating funds. Your typical allocation is 60% growth and 40% defensive, this particular allocation, give or take, is termed a balanced allocation. Growth assets such as equities and listed property trusts 60%. Defensive Bonds and Cash 40%

Take it from me, I advise clients every day on this particular way of allocating assets to a portfolio for the long term, taking into account their particular risk nuances, why, because we know it will provide returns in excess of the cash rate over the long term.

Now here we are, at this point in time very few living people that have witnessed falls in their growth assets of this magnitude. (Even the ones who had further diversified into absolute returns funds, non-correlating aka hedge funds.

So what do we do, we increase our exposure to equities and re-balance the portfolio because you are no longer a balanced investor (now an unbalanced investor) due to the lower equity values and are overweight cash and bonds, simple !

Mind you this theory has held true for a very long time and I believe it will continue to hold true for a very long time constantly seeking alpha.

So what, you might say, does this have to do with forex ?

This is the place where you become responsible for your own actions and this is the "beauty" I believe that attracts so many to this particular market. This is where you can make your own "aplpha" you are not relying on others, financial advisers, SAA etc to make your profits. I believe a well thought out long term strategy in the forex market can add to your diversification and future wealth.

I believe this is entirely possible. I have looked at many strategies here at the forexfactory alone, where the particular strategies success can be proven without too much difficulty.

Draw downs are a fact of life and it is only now that people are realising this also applies to equity and other markets.

So what I am saying, is that the forex offers diversification away from all other classes of assets. When mastered can lead to a truly alternate asset class that can provide both growth and income like any other asset.

I would like to hear from others who believe, that as I do, the forex can be become another "asset" that can provide income and growth like any other asset.

Mattfx

Of course it's just another asset. This is the big myth that draws everyone into Forex. That somehow it's magic or different or something.

Let me ask you this: When you buy Apple stocks, what are you actually buying? It could also be written as the APPL/USD pair. You are long Apple, short the US Dollar. (Assuming you are trading on an American exchange. If you are trading in Tokyo, it might be long Toyota short Yen.)

It is leverage that gets people. (And idiots in banks and hedge funds.) Depending on how you leverage yourself, Forex can be much like any other "stock" you own.

The only real advantage Forex offers is the ability to leverage your position, BUT....like anything else, too much of a good thing actually is good. Forex actually moves slower than most markets, hence the need for leverage. Otherwise, that $2000 account most people have wouldn't move at all....it would take WAY too long for that money to grow.

I started out in Forex, and these days - it's only about 16% of my portfolio.

Clockwork

"Forex managed account' with reputed forex broker is an asset because they pay 2 - 3 times more profit than banks for 10 - 12 years.

Thank-you Clockwork,

I must say I am enjoying your thread and thanks for responding to my thread, all be it a little late, as you may notice I do not have a lot of posts etc, the demanding professional life unfortunately keeps me away from this forum, site, I'll make a post on your thread if I can be of any assistance. I started another thread about optimalf if you care to comment ?

Also less than three posts to read there also....yet more importantly the spread sheets that I have attached are also a major contribution in there own right....

http://www.forexfactory.com/showthread.php?t=182784

Matt