Magical Penny

There has been a small rise in certain parts of the world recently of forex scams appearing, attracting victims and leaving them in a worse financial position. Malaysia seems to be a hotbed of forex scams, with many young people in their 20s and 30s falling prey to them throughout 2016.

It’s easy to see why so many people get caught up in them, with promises of making huge profits through a get rich quick scheme. However, if you want to be a serious trader or investor and genuinely improve your finances, avoid them at all costs.

Recent Forex Scams

Unlicensed forex service companies have been signing people up to invest in offshore forex companies with promises of fast returns. Many operate on a multi-level marketing method, making money from registration, recruiting and forex investment fees. When the ‘company’ has enough money it then closes and disappears.

Being offshore means it is nearly impossible to legally prosecute any of them. This has led to calls for fresh measures to tackle forex scams, especially in Malaysia where many young people are borrowing from friends, families and loan sharks to sign up.

How to Spot One

A forex scam can easily be spotted by the terms that are offered seemingly too good to be true. Often this is because they are! While forex trading does involve a lot of risk and there is a chance of making large profits, it will not be done overnight.

Any supposed forex company promising a get rich quick scheme is probably lying and just after your sign-up fee. Even the most successful traders will have spent years building up their skills and wealth through the practice. There are no get rich quick schemes that actually work, especially in forex given the small margins between currency values.

Avoidance Tips

In order to avoid being roped in by a scam, the best advice is to trade through a regulated, professional platform. Other tips include:

• Google the product/scheme – shows any problems others have experienced
• Check the firm online – visit the website, LinkedIn profiles of staff to ensure it is legitimate
• Talk to people – ask experts if they are aware of it and reputation
• Try a demo account
• Regulation – find the forex regulation body and see if it is listed

These should all help you avoid being scammed when starting out on what will hopefully be a successful forex trading career.   

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With governments and political parties constantly in flux, dealing with foreign currency is a major risk for investors.

Despite the risks involved, dealing with foreign currency can be hugely profitable and financially beneficial if you know how to do it right. Here’s how to minimize the risks of dealing with foreign currency:

Economic risks

By far the most real threat to your foreign currency is economic change. Although you can’t always be prepared for everything that happens when it comes to the economy, one way to prevent significant risks is to keep up with current affairs. Things like the recent Brexit and government decisions across the globe impact hugely on the value of currency, meaning that by staying in tune with current affairs and global politics, you should be well informed of any drastic changes coming into effect and be able to plan a contingency strategy well in advance. Companies like Ebury, help companies to minimize the risk by offering a flexible credit facility.

Diversify across the globe

Spreading your assets across many different regions is a sensible way to mitigate risk. By no longer having all your eggs in one basket, or one currency so to speak, you’ll be able to be sure of a certain degree of financial security thanks to the variety of different currencies that are available across the globe. Currencies that are tied to the US Dollar always tend to be much stronger, with many foreign currencies fluctuating. The Brexit hugely impacted on the value of sterling in the first few hours, with in dropping to the lowest it had ever been in over 30 years however as the days went on it slowly has increased again. The unpredictable nature of the situation highlights just how important it is to spread your assets across different currencies.

Invest in currency hedged funds

Hedging involves taking one risk to offset another and can be one of the best ways to reduce risks. This is the best way to mitigate risk if you’re very active when it comes to investment. By hedging you’ll constantly be making the most money from your investments, that is if all your moves are the right decision.

Dealing with foreign currency is always risky due to the nature of the world and the unpredictability of governments. However, by following these tips you’ll be able to minimize the risks for a more profitable investment.

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Having loads of money can be a real burden, can’t it? While it’s sadly not a problem many of us experience, there will hopefully come a time when you start to develop savings that require more attention than just being left sitting in a current account, for you to dip in and out. If you’ve started to build up a decent amount of savings and are wondering what to do with them in order to help them grow, then be sure to consider the following options and weigh up which is best for your financial situation and needs.

Savings Accounts

Anyone serious about saving will likely start with a savings account. Many banks and lenders will have a range of different savings account options available.

Pros

Putting your money into a savings account is a safe and secure decision, as all respectable credit unions and banks will be insured. Therefore, even if there is another financial crash, it should be safe. You’ll also have access to the funds at any time and most accounts can be opened with a small initial deposit and no requirements to continue depositing certain amounts.

Cons

Compared to some other savings options, most savings accounts have relatively low interest rates. This means it will take longer to increase your savings. Depending on the lender, there may be a minimum balance amount that must be adhered to as well, with charges enforced if your savings fall below this.

ISAs

Since they were first introduced in 1999, ISAs have become a popular saving method for a lot of people, with many variations from help to buy to tracker ISAs available.

Pros

One of the main benefits of all ISAs is that they are completely tax-free. This includes all the interest gained on them, no matter what your income. Some fixed-rate CASH ISAs have higher interest rates than the instant access or easy-access kind as you must leave your savings in the account for a set amount of time, often at least one or two years. You can save up to £15,240  in an ISA.

Cons

For some, that figure may be a negative if you have plenty of spare cash to save, as it is the maximum that can be split across various ISAs too. If you do need to withdraw then expect to have the interest rate slashed or be charged. If you do withdraw from an ISA, you can now put that money back into the ISA without it affecting the annual allowance, as long as it is before the end of the tax year in which you made the withdrawal, which ends on the 5th April each year. For example, if you put in £15240 in May, you could take it out and put it in again, as long as it is before the 5th April of the next year.

Investments

Those who are willing to take a little risk to increase their savings should consider putting some of their savings into investments.

Pros

A much higher return on investment can be gained through investments. Depending on how much of your savings you decide to invest, and the success of where it is placed, it can be incredibly rewarding. It can be a more exciting way to use your savings, as you take full ownership for each investment.

Investments can go in a Stocks and Shares ISA – when an investment is in an ISA all the gains are tax free -you never have to pay any tax on the funds when you access the money.

Cons

There is a lot more risk involved and the chance that your investments value might have gone down at any time.  There is a risk you could end up with less than you started with, so only invest money in investments when you have many years before you might need the money, to give it time to grow and recover from any losses.

Consider all the pros and cons of such savings choices before investing your spare cash in any of these options.

If you’re new to investing, have a read of other investing articles on Magical Penny by clicking here

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In the hours following the Brexit result being announced, the price of gold was one of the day’s main winners as it soared by over 20%. Precious metals as a whole all had a successful time as they increased in value, due to the UK voting to leave the EU.

The markets have calmed down a little since those crazy first few hours and days, but the price for many precious metals still remains relatively high, especially compared to pre-Brexit levels. There are a number of reasons as to why this price hike occurred, that can be used in predicting future price changes.

The Safe Choice

Buying gold is traditionally a safe haven option for many traders and investors when market risk is significantly ramped up. Once a sense of panic set in as the result was confirmed, many took their financial investments in stocks, shares, bonds and more and moved them over to precious metals.

For many the aim will have been to move it over for the short term until the markets have returned to normal and are more predictable. Uncertainty in the markets always leads to precious metal boosts, specifically in gold as it provides better returns on investment than any other risky options during such times.

An Unexpected Result

The Brexit result was also unexpected by most people, which led to fewer investors buying into precious metals as a safety option before the referendum. Instead, many were happy to keep their stocks and other investments where they were, until the relatively shock announcement that the UK had voted to leave the EU came through.

Due to many investors expecting the UK to remain, they were caught off guard and ended up buying into gold and other precious metals as soon as the result was announced. This is one reason the price jumped up by so much so quickly.

Silver’s Surprise

While gold was the precious metal most were focusing on, it was actually silver that experienced the biggest gains in reaction to the Brexit. Gold was always predicted to do well as a popular safe haven, but silver surpassed all expectations.

It was up 45% in dollar terms and 65% in sterling, reaching its highest level in two years. Safe haven demand, the US Federal Reserve not expected to raise rates and the Bank of England and European Central Bank stimuli, all worked together inadvertently to create the rally. Plus, lower interest rates reduced the opportunity cost of holding such precious metals, making it a more attractive prospect.

What Next?

Some investors may have just bought into precious metals as a short-term, safe haven choice, with the intention of selling sooner rather than later. However, other investors believe the rise in price has legs and will last into the future.

With the fallout from the Brexit yet to fully take place, a lot of uncertainty surrounding the markets remains. Gold and silver have both been on an upward trend this year too, with the Brexit representing a sharp rise that may well level off. Precious metals look set to soar in value again once Britain actually leaving the EU gets underway.

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The financial markets are in a state of chaos at present, unhinged by widespread political uncertainty. While the consequences of global, geopolitical tension and a changing European Union are impossible to predict, media sensationalism is causing many to fear the worst and sending a state of panic throughout the UK, the U.S and the single market. With cross-border and international deals also declining as investors seek flight, it is difficult to know where to commit your money in the current climate.

3 Considerations when Building Investments

 If you are able to step back from the madness and see things through a clearer perspective, however, you will quickly understand that underlying laws which govern change in the financial markets will continue as usual. This means that rather than focusing narrowly on wider, economic factors, you should instead select investment options and build a portfolio to suit your lifestyle.

Here are three steps you can take to achieve this: –

1. Evaluate your Disposable income levels

Ultimately, it is important to evaluate your levels of disposable income prior to choosing an investment option. After all, you cannot trade with money that must be committed to bills or other expenses, so the amount of freely available capital that you have will dictate your investment strategies. If you have minimal income, for example, it is better to invest in low-risk options such as dividend investments, as these deal with growth blue-chip firms and are known to deliver regular returns.

In contrast, those with higher levels of trading capital may prefer to diversify and invest in higher-risk derivatives and entities such as the forex market.

2. Consider your passions and areas of knowledge

In most markets, knowledge and understanding are an investors’ core weapons. This ties directly into your lifestyle, particularly if you base your investment choices on sectors that you are passionate about or knowledgeable in.

Let’s say that you have an innate understanding of the automotive industry, for example, and regularly keep up-to-date with the latest innovations, trends and events that are shaping the marketplace. You can use these attributes and habits to inform your investment decisions, enabling you to capitalise and improve your returns over time.

3. Remember your Pension Plan

When we discuss investment options it is all too easy to overlook our pension funds, which are often taken for granted as contributions are made automatically. The type of pension plan that you invest in will have a huge impact on your future, however, so it is important that you select an option which is tailored to suit your future lifestyle plans. Take SIPPs (self-invested pension plans), for example, which are hosted by Bestinvest and other wealth management firms. This type of financial product affords you greater flexibility in terms of how you access your pension funds, whether you wish to initially withdraw a lump sum or commit all of your capital to regular, weekly payments.

For more information in investments browse the Investing category on this site

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