How Forex can help you being financial free FASTER!
I always heard that people want to achieve financial freedom or being rich as fast as they can. Maybe they are totally fed up with their current life and can not stand at their current condition anymore. Yes you can achieve financial freedom if you are using a right way. Today I'm going to share with you what is Forex and how you can leverage on it to be financial free FASTER!
The Foreign Exchange, also called as “Forex" or “FX", is a market where currencies are traded. Forex market is the biggest liquid financial market with an average traded value around $1.5 trillion per day. It is hard to determine an exact number. Forex market is open 24 hours a day, 5 days a week - 00:00GMT on Monday to 22:00GMT on Friday. In forex market, the currencies are being traded among the major financial centers in London, New York, Tokyo, Frankfurt, Hong kong, Singapore, China, Paris and Sydney. Different country have different time zone and this is why forex market is open 24hours.
Benefits Of Forex in achieving Financial Freedom
In year 2004-2005, I involved in Forex trading. I'm not really involved since I just trade using demo account. I really gained a lot of trading experience at that time and I found that forex can help us become financial free Faster because of certain “features" on Forex that we can not found in other investment. Below is the list:
- Leverage, 1:100 - 1:400 Forex can let us leverage on our money. For example, if the rate is 1:100, for every dollar you invest, you can get the effect of investing $100 or more. What does this means to you? First you can invest in forex with a small amount of capital and everyone can invest in forex without any big capital. Second you can leverage on forex and increase your capital faster. If you read my post Cash flow & Capital Gain, 2 points that you must focus to achieve financial freedom then you will understand how important capital gain in achieving financial freedom.
- Trading Time Forex market is open 24 hours a day, five day a week, with currencies trading around the world in major financial centers in London, New York, Tokyo, Frankfurt, Hong Kong, Singapore, China and Sydney. This is an advantage for you because you have a longer trading time in forex than other investment. However it is not advisable to trade 24 hours, 5 days a week. You must learn to select certain time frame and invest long term or short term. From my experience, the more hours you trade, the chances that you will loss money is higher due to your emotion. The price of currencies are changed in a “up and down mode". The longer you follow the price changes; you will start afraid of losing money and make a lot of wrong trading and ends up losing money.
- High Liquidity Forex market is a high liquidity market. It means you can invest and take out your money from forex market very easy. For example, a part of my plan to financial freedom is investing in forex market for capital gaining, then I take out the money from it and go for Real estate and business investment to get passive income. First I leverage on forex to increase my capital, then at the same time I search for profitable real estate or business, since forex market is high liquidity, I can take out my money from forex and invest in real estate and business that I found is a good deal.
- Small initial investment Because of its “leverage" feature, you actually don't need a lot of money to start trading in forex. If you go through the major forex trading company, you will found that with as little as $500, you can start trading in forex and earn money. However, I don't recommend this. From my experience, the more money to invest, the lower risk you can loss your money. It is ok if you don't understand what happen here, but I will make a more detail explanation later in my future post.
- Flexible Settlements Foreign Exchange can be tailored to specific investment objectives. Investors may choose from different trade strategies based on financial goals and needs, whether it is aggressive, conservative, long-term or short. From my experience, I make more money if I invest in long-term, for example, hold a position for more than 3 days or 1 weeks. Of course, if condition approves, I also invest short term and become a day trader. However, the risk is high and I don't make as much as money in longterm.
- Analyze a Nation like a Corporation Currencies are always traded in pairs - one currency is purchased with holdings in another. As with stocks, better FX returns are provided by the currency of a country that demonstrates faster growth and is in a better economic condition that others. So to me it is more easy to research in forex market.
Conclusion
Foreign Exchange market trading is a fast growing field that offers some significant advantages over other investment methods. However many people are reluctant to involved simply because they lack the necessary knowledge. But once you get used of it, forex really a great investment tools to implement in your financial freedom plans especially in capital gaining section.
A complete list of Ouestion of the Day Marathon
JLP at AllFinancialMatters has organized a Question of the Day Marathon for the month of August. Each weekday during August, a different personal finance blogger poses a question for readers to answer. Here’s a complete rundown so far this month:
Day 01 AllFinancialMatters - If your budget required you to give up something that you like because you just didn’t have enough money to cover your expenses, what would that be?
Day 02 Caustic Musings - What is the weekly average cost per person for food in your household, including groceries, snacks and eating out?
Day 03 The Investimist - What was the last thing that you splurged on that you didn’t really need?
Day 04 Experiments
in Finance - How many credit cards do you have and what’s their combined credit limit?
Day 05 Free Money Finance - Which is more important to financial success: saving money or making your income as high as possible?
Day 06 Single Mom & Money - In terms of your annual gross salary, what percentage do you save? Are you happy with that amount or do you think you could do better?
Day 07 Young and Broke - If you had $10,000, one day, and one store to spend it in, what store would you choose?
Day 08 Savvy Saver - If you had to pinpoint
the one financial decision (good or bad) that put you on the path to where you are now, what would it be? If you could do it over, would you change your decision?
Day 09 Young Finance Guy - What do you consider an expensive night out?
Day 10 Money Dummy - What’s the most unusual, quirky, or bizarre thing involving money that’s happened to you personally?
Day 11 Steve Braun - What percentage of financial success comes from “financial skills†and what percentage comes from “character?â€Â
Day 12 Mighty Bargain Hunter - What’s the best deal that you’ve ever gotten in a store?
Day 13 Journey to
Financial Freedom - Do you have any side income other than your paychecks?
Day 14 PennyFoolish - What are your vices?
Day 15 Consumerism Commentary - While growing up, what were you taught about personal money management by your immediate family and surroundings?
Day 16 No Credit Needed - What was the very first thing you purchased using credit? What was the very last thing you purchased using credit?
Day 17 mapgirl’s Fiscal
Challenge - How much of a balance do you leave on your checking account(s)?
Day 18 Chipping Away - If tomorrow you were to suddenly find yourself unemployed, what would your action plan be and how much trouble do you feel you’d be in?
Day 19 Udandi & the Craft of Money - What is your hobby and how much money do you spend on it?
Day 20 Money & Values - Do you involve your values in your money decisions?
Day 21 Pragmatic Finance - What factors affected the career you chose? Was it purely about the pay or were there other aspects that influenced the decision?
Day 22 City Girl’s Financial Blog - In the past 24 hours, what have you done in relation to money?
Day 23 Get Rich Slowly - What does money
mean to you?
Cash flow & Capital Gain, 2 points that you must focus to achieve financial freedom
Recently I played a board game with my mentor. It was Cashflow 202 from Robert Kiyosaki, the author of book Rich Dad Poor Dad. This board game is almost same with the normal monopoly game that we played. However, Cash flow 202 is much more realistic because it is included some of the real life case about how we spend money, make money and invest money so we can be financial free in a certain time. Besides that if you are not lucky enough, maybe financial disaster will happen to you too such as bankruptcy. This is why I love this board game very much because it just likes what happen in our life.
Did I learn some thing from Cash flow 202? Yes I learn something. In this game there are 2 words that always appear - Capital Gain and Cash flow. It seems like both of them are playing some important role in achieving financial freedom.
From the game, I learn that if we want to be financial free, then we must build some kind of passive income source to support our life and this is where “CASHFLOW†is paying its role. So to get this kind of cash flow, we must invest or start a business. However, I learn that most of the time, those investments and businesses need money. The bigger the investment, the more money you need to put into. In order to invest, we need some capital and if you want to involve in more investment, then “CAPITAL GAIN†is important to you. In conclusion, to be financial free, you must build your cash flow by investing. You need money to invest and then you must learn capital gain to increase your capital.
Cash flow
In personal finance, what we always learn is how to manage our money or in other words, how we control our cash flow. We must learn and know how to control the flowing of our cash. If our cash flowing out more than it is flowing in, then we might in financial disaster. That’s why we learn about personal finance, learn how to manage our cash flowing so we won’t fall into the disaster hole but instead have a brighter future or retirement.
However, if you want to be financial free or retire as early as you can, then you must concentrate on how to build a cash flow source that we called passive income. Then your focus will be totally different. Everytime you invest, you must learn and calculate out how much of positive cash flow(flowing in) will this investment brings to you. Besides that, you also need to calculate out what is the rate of ROI( Return of Investment) for an investment. Beside that you also must analysis and consider a lot of factors before you invest.
Below is some of the example of investment that will bring you cash flow:
- Real Estate - Invest in property, rent out for people and get passive income from them.
- Business - Invest in a profitable business and get a profit sharing at the end of every month or in certain period.
- Anything that come with interest - Invest in an investment and then it will generate some kind of interest to you. For example, CD and FD.
Capital Gain
Do you ever come across a profitable investment that you cannot afford simply because you are not enough money? For example, today is Tommy’s lucky day because he able to find an investment opportunity and he is 100% sure that this investment will generate money to him. However, he found that he needs $10,000 to invest in this investment and he only has $5,000 with him. So Tommy feels sad and down and thinks that this kind of investment is for those rich people.
Yes, in life, this kind of situation always happens. However there is solution for this - Capital Gain. Besides invest for passive income, we also must learn how to invest for capital gaining, so we can afford a bigger investment or more investments which will bring more income for us. Don’t worry, this “capital gaining†skill can be learned by reading and from experience.
Below is some of the example of investment that has the effect of capital gain:
- Stocks are the most common tool that you can use to improve your capital.
- Forex is another potential tool where you can benefits from the leverage which allow you earn more money with less investment capital.
- Real estate also a choice by flipping a property
- Business. Invest and make your business become profitable and increased in market value. Then sell it out for a big money.
Conclusion: Cash flow VS Capital Gain, which one to go first?
It seems like both Cash flow and Capital Gain is important right. Which one to go first is all depending on your plans and strategies to financial freedom and also your current financial status. If you are a teenager who just start working with low paychecks, or you don’t have any saving for investment. Then you might concentrate on Capital Gain investment which helps you growing your capital so you can afford more investment. So your goal should be how to make every $100 become $1000 or more. If you lucky enough, you might find some cash flow investment that doesn’t need big amount of capital. On the other hand, if you well manage your money and you are having plenty of extra money to invest, then you might consider those Cash Flow investments. It is really all depends on your plans and current financial status.
The special of Real Estate Investment
Real estate, I found that this really a special investment tools that you and I should pay to. So far what I found is real estate is one of the investment that contain both “cash flow†and “capital gain†features on it. For example, you bought a rental property with $100,000, you rent it out and every month you get a $300 of passive income from renting. However, after 2 years, this property goes up in value to $150,000 and you sell it and get $50,000 of profits in capital gain. The good news is you can leverage on mortgage, maybe you just need to pay $3000 for down payment and get a mortgage on the balance. So your ROI is 16.7%. Not bad. This is the special benefits of Real Estate investment.
