Are you thinking of dipping your toe into the waters of Europe’s thriving financial markets? If you’ve made the decision to move out to Spain, then it’s likely that you’ve already got some experience of tricky investments: from selling or renting out a place back home to negotiating on a new place, there’s nothing like the global property market to open your eyes to the world of investments. However, trading is a different world: some funds have seen returns drop by over 6% in recent years, and you don’t want to risk being part of such a problem – especially if retirement is on the horizon. This article will explain how to set yourself up as a trader without running the risk of failing at the first hurdle.
One asset class at a time
When you first start out as a trader, you’ll most likely read articles encouraging you to invest small amounts on many different forms of assets. This strategy of maximum diversification means spreading out your investment power across many different instruments, such as stocks, exchange-traded funds (ETFs), cryptocurrencies, and properties. While diversifying within each type might be the right move for a beginner trader to make, trying to take on many asset varieties at once is a bit harder. That’s because each “asset class” – or type of investment – is different, and a lot of learning is required every time you move to a new one.
Take the foreign exchange markets. Opening a position in this market is very different from opening a position on, say, the stock market, because with forex, you will have to forecast the performance of one currency relative to the potential performance of another. For some new forex traders, this is a tough task because it requires an understanding of two different markets, and how they interlink. By focusing on one asset class at a time, then, you might be more exposed to the fluctuations of one market – but at least you will be able to understand it inside out and make informed investment choices.
Find a decent broker
From a trading safety point of view, perhaps the most important decision that you’ll need to make is which broker to choose. Brokers do, unfortunately, regularly go out of business – and in many cases, this is as a result of breaking the law or flouting regulations. There is also no guarantee that going for a well-known provider will bring security. Take the case of the “Forex Mafia” – three former forex professionals who are facing criminal proceedings in the US. They were linked to high-profile institutions such as HSBC but still stand accused of conspiring to artificially alter foreign exchange rates on the global markets in order to ensure that the bank benefited financially from corporate forex transactions. Despite their associations with big names, the three face trial and possible jail sentences.
There’s no way to avoid running the risk, then. However, what you can do is make sure that you have the tools to spot unscrupulous brokers and weed them out. First off, you should always check whether or not they’re properly regulated. This means that a governmental body in the broker’s country will monitor their behaviour, and it will also mean that they’ll have to share certain pieces of operational data for maximum transparency. In Britain, brokers are usually regulated by the Financial Conduct Authority (FCA). Your broker may be based abroad, and if so, you should look out for important global regulators such as the Australian Securities and Investments Commission (ASIC) or the Cyprus Securities and Exchange Commission (CySEC). This information can sometimes be hard to find, so it may be worth looking at the forexfraud.com regulated forex brokers list to see whether one you like the look of is properly overseen by the relevant authorities.
The investment space both in Europe and further afield is an appealing one in many ways. However, with it being quite common for assets of many varieties to decline by even 10% in the space of just a few days or weeks, there are never any guarantees – and there’s a chance that you’ll find yourself losing some of your hard-earned retirement cash if you invest it wrongly. By looking out for the right broker and taking small, well-researched steps, though, you can make the chances of success as high as possible.