Examining High-End Investment and Speculation Vehicles
In some ways, high-quality investments are not much different from traditional ones: you invest your money and make all the same decisions as the average investor. The difference is the amount of capital in play (usually a lot) or exposure to risk (usually high).
In other ways, high-end investing is almost an entirely different beast. It is not so much about investing (buying and holding) as it is trading or speculating – assuming business risks in the hope of profiting from market fluctuations.
Basically, high-end investing means that you have to get rid of all your preconceptions about investing in buying, holding, allocating assets, and basically all of the strategies that stockbrokers put out for public consumption.
The following sections explain some of the advanced investment tools available to you.
futures and options
Futures and options, by their very nature, are complex financial instruments. If you invest in futures and options contracts, you need to monitor your positions daily, often even hourly. You have to keep track of the expiration date, premium paid, strike price, margin requirements, and a number of other variable variables.
However, understanding futures and options can be very beneficial because they are powerful tools. They provide opportunities for leverage and risk management that your average financial instruments do not. If you can harness the power of these tools, you can greatly increase your leverage and performance in the markets.
goods
Commodities are the raw materials humans use to create a livable world: agricultural products, mineral ore, and energy that are the building blocks of the global economy, such as crude oil, sugar, frozen concentrated orange juice, and livestock feed.
Many people associate the commodity and futures markets incorrectly. There is no doubt that the two are closely related: futures markets provide a means for trading users to hedge against commodity price risk and a means for investors and traders to take advantage of this price risk. But stock markets are also deeply involved in commodities, as are a number of investment vehicles, such as master limited partnerships (MLPs), exchange-traded funds (ETFs), and commodity mutual funds.
Forex Trading
When you engage in foreign exchange (forex) trading, you are essentially speculating on the value of one currency against another. You “buy” a currency just as you would buy an individual stock, or any other security, in the hope that it will generate a profitable return. But the value of your security is particularly volatile due to the many factors that can affect the value of a currency and the surprisingly fast time frame in which these values can change. However, if you are an active trader looking for alternatives to trading stocks or futures, the forex market is hard to beat.
Forex trading is a challenging and potentially profitable opportunity for educated and experienced investors. Before deciding to participate in the forex market, think carefully about your investment objectives, level of experience, and risk appetite. Most importantly, do not invest money that you cannot afford to lose.