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Make Money Selling Money? Why Foreign Currency May Be a Smart Investment

Diversify, diversify, diversify: It’s among the most common — even cliched — advice from financial experts to investors.

But what if you want to go further with that than the usual methods of playing different sectors in the stock market, or putting a share of your portfolio into conservative bonds or riskier international markets?

You might consider trading foreign currencies, which just a couple of decades ago was an option mostly restricted to big money investors. Now, it’s widely available to the general public, and generating increasing interest.

And in today’s age of social networking, foreign exchange has gone social too: In addition to seeing that a friend “liked” a photo or a business on Facebook, you can now trade on sites that let you see when that friend bought Swiss francs or sold yen.

Foreign currency trading, which became possible for the average investor about 15 years ago, has added that social aspect — and been made all the easier — thanks to online brokers like Xchange of America. The idea behind their sites is to remove as many barriers to entry as possible, so that anyone — not just savvy investors, can use them.

A Risk, But a Limited One

As exciting as the adrenalin rush of foreign exchange trading can be, it requires as much homework as any other investment, and even then, of course, there are no guarantees. As with any investment, the odds can turn against you. But currency trading offers a bit of protection by being a bit less flexible: You can’t buy any nation’s money on margin, so unlike equity trading, where a bad leveraged buy can leave you owing more than your initial investment, in the currency exchange market, your risk is limited. Though forex trading can help you take advantage of market changes at home, the true advantage can be more global.

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