Anyone with a basic knowledge of the financial sector has at least once in his or her life wondered whether he or she would invest his or her personal savings in order to multiply them, or at least protect them from devaluation as a result of inflation, which has a strong place in the Russian economy. According to statistics, one in three Russians has personal savings, and the purpose of these savings is not specific – the money is saved “on a rainy day” or “in reserve”.The issue of investing free cash is quite complex, and the higher the amount of savings, the more difficult it is to “correctly” attach your money. Indeed, 50,000 rubles will not be enough to start a business of its own, and almost the only way to save money is to deposit it in a bank to get a small but guaranteed interest covering part of the inflation. If the savings exceed 1 million rubles, the option with the bank is not suitable, because the existing Russian system of deposit insurance allows the depositor to return only up to 700,000 rubles in case of closure of the bank. Of course, it is possible to place funds in several banks, or even in a foreign bank, but the situation in the world economy is becoming more and more turbulent day by day, and we would like to be able to quickly cash out their money in case of need.The second most popular way to save money is to buy real estate. You’d think you’d buy an apartment, rent it out and have a steady, passive income. However, many do not take into account the depreciation of the apartment and the objects in it, which requires the owner to completely renovate the furniture and appliances, as well as to carry out capital repairs at least once every 5 years. Such costs, even in the case of economical repairs, can easily reach 10-15% of the value of real estate, which significantly reduces the amount of profit and equates this method of preservation of funds to depositing the savings in the bank. The only advantage is the constant rise in real estate prices, comparable to inflation rates, and some protection of savings from sharp financial shocks on a global or national scale.The above methods of investing personal savings are aimed at preserving funds rather than increasing them, so they are difficult to attribute to investment. Yes, the risk is minimal, but the percentage of income generated, taking into account the current inflation rate, is also very low. A more profitable way to invest savings is to invest in real business or financial markets.According to statistics, the percentage of successful entrepreneurs, as well as private traders, does not exceed 7-10%. This means that at best 1 out of 10 investors will not “burn out” and will make a profit. These statistics make us think strongly about the prospects of independent business or speculative trading in financial markets. This is the root cause of the widespread proliferation of various types of funds and fiduciary management programs, professionally engaged in increasing the funds of their clients.In recent years, investments in so-called mutual funds, i.e. mutual funds, which are structures without legal personality and whose assets are under trust management of the fund, have become very popular. In fact, a unit investment fund is formed from the money of depositors (shareholders), which is accumulated and managed by a professional manager. Despite strict state control over UIFs’ activities, investment risks exceed the risks of fixed-income securities and other investment instruments with state guarantees, however, this is compensated by rather high profitability, sometimes reaching 50-60 percent per annum.Another more efficient investment (but also more risky) is the participation in the trust management program of one of the brokers providing services in the Forex market. One of the most interesting examples is the Mill Trade company offering 2 main investment programs to choose from: “Golden 7” and “MILL-INVEST”. According to the company, both programs bear minimal risks, as the invested funds are accumulated and transferred to the management of the company’s professional traders, and the funds are distributed among the seven best traders, thus ensuring the diversification of investments. According to the statistics given by the company on its page, the Golden 7 program allows you to get up to 13% of monthly capital growth, which, in the current environment, is a very high figure. The program “MILL-INVEST” does not bear any risks at all (again, according to the information on the company’s page) and guarantees the investor 7% of monthly income. The reliability of the data provided by the company can be verified by feedback from investors who participated in these programs, but I have not personally encountered any negative feedback yet.Mill Trade Company is not a monopolist in the sphere of providing investment programs, almost every second broker offers such services to its clients. Despite rather serious differences between all these programs, their essence is the same – accumulation of investors’ funds and their transfer to the trust management of a group of professional traders. However, no guarantees, other than personal assurances from brokers, are usually provided, and the funds invested are not legally insured against possible losses. The best way to invest in such programs is to search for the most balanced offers among brokers and to allocate the amount of investment among several programs.Among the most interesting programs, it is possible to allocate:- Index TOP 20 – investments in the top 20 managers from FOREX MMCIS group- Share4you – autocopying service from Forex4you company.The same way of investing is to invest in PAMM-accounts (Percent Allocation Management Module (PAMM). PAMM-account is a system of trust management of investments, providing duplication of transactions of the manager on the accounts of investors. The role of the manager is usually played by the trader who publishes statistics of his trading operations in a special section of the broker’s website. The better the rate of return of a trader, the higher his place in the rating, and the more investors invest in it. You can learn more about choosing a manager by reading the article: How to choose a manager of a PAMM-account?When investing in a PAMM-account, the investor usually concludes an agreement with the trader, which reflects all the conditions of cooperation: the distribution of income, losses, investment term, fines for early withdrawal of funds, etc. The volume of trading operations carried out on the investor’s account is usually proportional to the size of the trader’s account to the size of the manager’s account. Thus, if the sum on the account of the manager is equal to 10000 dollars, and the sum on the account of the investor makes 1000 dollars the volume of duplicated trading transactions on the account of the investor will be equal to 1/10 volume of transactions on the account of the manager.Similarly, profit is allocated after the investment expires, net of management fees and subject to the terms of the agreement. If the manager does not receive profit for the reporting period and bears losses, he will not receive remuneration until he restores the balance of the PAMM-account to the previous level.Let’s illustrate all of the above with the following example. Let’s assume that the amount on the account of the manager is $10,000, on the account of the investor1 – $1,000, on the account of the investor2 – $5,000, on the account of the investor3 – $10,000, on the account of the investor4 – $20,000, the term of investment under the concluded agreement – 1 month, the distribution of profits – 60/40 (60% to the investor, 40% to the trader). If the manager buys 1 lot of EUR/USD, the investor’s account1 opens a long position of 0.1 lot, investor2 – 0.5 lot, investor3 – 1 lot, investor4 – 2 lots.Option 1 is a positive development. Let’s assume that the EUR/USD pair has grown by 250 points in 25 calendar days, the manager fixes the profit and does not open new positions. Thus, the profit for the manager on his own account will be 2500 dollars, the profit on the account of the investor1 – 250 dollars, on the account of the investor2 – 1250 dollars, on the account of the investor3 – 2500 dollars, on the account of the investor4 – 5000 dollars. Taking into account the commissions specified in the agreement, the profit between the investors and the manager will be distributed as follows: investor1 – 250*0.6 (60%) = 150 dollars; investor2 – 1250*0.6 = 750 dollars; investor3 – 2500*0.6 = 1500 dollars; investor4 – 5000*0.6 = 3000 dollars; manager – 2500 (profit on own account) + 250*0.4 (commission on the investor’s account1) + 1250*0.4 (commission on the investor’s account2) + 2500*0.4 (commission on the investor’s account3) +5000*0.4 (commission on the investor’s account4) = 6100 dollars.It is obvious that the manager is interested in profitable trading, as his income increases several times due to the fees received for the maintenance of investor accounts.Option 2 – Adverse developments. For example, for a calendar month, the total losses of a manager amounted to 250 points with the same trading volume equal to 1 lot. Thus, the loss for the manager will be 2500 dollars, for the investor1 – 250 dollars, for the investor2 – 1250 dollars, for the investor3 – 2500 dollars, for the investor4 – 5000 dollars. The manager will not receive any remuneration until he restores the balance of his own account and, accordingly, the accounts of investors, and will not start to make a profit at the end of the next reporting period.Technically, for the trading platform PAMM-account acts as a single trading account, but the manager does not have the ability to withdraw funds from investors, which greatly reduces the risk of any losses as a result of fraud. Legally, a PAMM-account is one of the forms of trust management, but the current implementation of this technology by most brokers contradicts Article 1013 of the Civil Code of the Russian Federation (Civil Code of the Russian Federation), as in trading used credit funds (leverage). Also, the rules specified in Article 1012 of the Civil Code of the Russian Federation are often violated, as a result of which, in accordance with Article 1017 of the Civil Code of the Russian Federation, the trust management agreement is recognized as null and void, and the investor is deprived of any legal protection.The analogy of using PAMM-accounts is the so-called “social trading”. Some trading platforms allow traders to use the options of copying trades of experienced colleagues on their trading account. In particular, the MetaTrader 4 and MetaTrader 5 trading platforms have a “Signals” tab, which contains a list of available for copying trading accounts with detailed information on them. Signals are sorted according to the rating and can be either paid or free of charge. The main difference between social trading and PAMM-accounts is that there is no need to conclude agreements, pay commissions, no investment terms, etc. In fact, in this case, the trader automatically copies trading operations on his trading account, so that he is released from making trading decisions. He has no obligation to the person providing these signals, but assumes all risks in full.Investing in PAMM accounts and social trading carries higher risks than the risks of a “cautious” but unprofessional trader who has some experience in real trading on Forex and correctly applies the principles of management. If the trader has the above-mentioned experience and sufficient capital (from $100,000), he is quite able to conduct profitable trading on his own, bringing a stable income with acceptable levels of risk. In addition, as the experience is accumulated, a trader may well move to the “professional league” and firmly occupy his niche in it.The availability of significant capital opens up a lot of opportunities inaccessible to small speculators. Almost any broker provides its clients with beneficial VIP-conditions: increased rate on unused funds (up to 20%), reduced commissions, services of personal managers and consultants, improved swap, individual leverage, free trading signals from the most advanced systems of technical analysis and financial analysts, access to specialized portals, news feeds, analytics, etc. As a rule, the number of VIP-clients includes any trader who has more than 50,000-100,000 dollars in his account (depending on the conditions of a particular broker).If a trader does not have sufficient experience in financial markets, the best way to invest is to invest in trust management programs of several brokers to diversify the investments. In parallel with the investment, it is still recommended to study the basics of trading on the Forex market to change the proportions of the investment in favor of independent trading, because only personal risk control provides certain guarantees for the safety and growth of your capital.
01 Nov