Investments that Won’t Break Your Bank

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Trading used to be associated with high income households due to expensive brokerage commissions. Now with introduction of low cost online brokers lots of fairly cheap investment opportunities emerged. In this article we are going to review three least expensive ways people can invest their money and wait for high returns.

Forex

Forex is a market where world currencies are being traded. Although most people think that only national financial institutions and big corporate players are able to invest money on Forex, since recently everybody can try out their skills (and luck) by trading world currencies. Forex comes with plenty of benefits as a market and despite popular opinion, investors don’t need huge amounts of cash to make their investments profitable. This is due to high predictability of Forex, which makes it one of the least risky investment environments. Investors can control $100,000 with down payments that are as small as $1,000, because currency pairs move less than one percent per day. This makes the leverage very high, sometimes even 250:1, which was made into an industry standard.

When it comes to currencies, their exchange rates are mainly defined by supply and demand, without any additional factors, or artificial hypes. This is another fact that adds up to the Forex reputation of being one of the safest markets to invest. Here we listed some of the main pros and cons of Forex trading:

Pros

  • Market is open 24 hours, when New York market closes, the one in Tokyo opens, after that the one in Europe and so on;

  • Unlike equity markets, Forex traders can use ultra-high leverage;

  • Forex comes with much less risk than other markets;

Cons

  • High leverage can create volatility and act as a double-edged sword ;

  • Forex is one of the least dynamic markets;

  • It is very dependable on world politics, which can be very unpredictable;

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Binary Options

These are the options that depending on supposed outcome can be paid in full or can lead to no payment at all. “In the money” and “Out of the money” are two important terms to remember when it comes to binary option’s outcome. First one means that the assumption on which binary option is based turned out to be true, in which case the option’s owner will receive $100, while the second term means that the assumption was wrong, in which case the owner won’t get anything. Price of one binary option can be anywhere from 0 to $100, depending on the possibility for “In the money” scenario.

When it comes to binary option, risk and reward are known from the beginning. This makes it easier for the traders to create elaborate strategies and employ their knowledge in statistics. Binary options are sold on over-the-counter markets, and they are much less regulated than most other options and equities. Here are some of the main pros and cons associated with this kind of options:

Pros

  • Risk and reward are known from the start;

  • In most over-the-counter brokerage firms, there’s no commission on buying binary options;

  • Binary options can deal with many different asset classes from around the world, and it is easy for the trader to choose an assumption from the industry he/she has good knowledge of.

Cons

  • Binary option is not an asset, which means that its owners don’t own anything before the option becomes “In the money” one.

  • There is not a lot of regulations when it comes to binary options trade, which makes it little bit shady at times;

  • Reward is always less than a risk, which means the trader must be right for the high percentage of binary options to cover the losses made by “Out of the money” ones.

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Penny Stocks

Penny or the micro-cap stocks are shares of small public companies that are sold bellow $5 per share. These are traded over-the-counter on exchanges like OTC Bulletin Board and Pink Sheets. Although most financial magazines advise people to stay away from penny stocks due to very volatile market, as well as many frauds like pump-and-dump and short-and-distort schemes, there are many millionaires, like Timothy Sykes for example, who got rich by trading penny stocks. If you think about it, almost every startup company that decides to sell its shares, puts them on penny stock market, and since we are living in the world that provides opportunities for fast growth of companies in various industries, we can clearly see the model that enabled many penny stock millionaires to earn their wealth.

When trading penny stocks finding the right information about the company is crucial. Since these stocks are only loosely regulated by SEC. Because of this, traders sometimes need to search elsewhere for the right information and this can lead them to various online directories, forums, niche websites and even bars located in company’s neighborhood. Therefore creativity approach to finding the financial information about the company is one of the most important things that turns regular penny stock trader into a millionaire. Like with other two options from this article, we listed some pros and cons of penny stock trading.

Pros

  • Penny stocks are cheap, which enables traders to make big and diversified portfolios;

  • Since penny stock market is very dynamic, right investment can bring huge profits in short period of time;

  • Startups tend to grow fast after getting their initial funding, same goes for penny stocks, since they are mostly associated with startup companies;

Cons

  • Penny stock market is the most volatile market out there;

  • There are lots of fraudulent activities on penny stock market;

  • Lack of regulation by SEC, makes information about penny-stock companies hard to find.

Good investments are always better than regular savings and with the introduction of online brokerage firms, forex brokers and binary option traders, even households with small incomes are able to invest their money earn from trading and dividends.

Marcus Jensen is an IT professional. He is an Editor-in-Chief of Technivorz blog, and writes about technology, business and marketing.

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