The short answer to whether it is a better investment in stocks or Forex (FX) in Singapore is ‘Forex’. The long answer is much more nuanced. As with virtually all investment decisions, each option has positive and negative aspects.
For example, when dealing with currencies (such as the US dollar vs the Singapore dollar), an investor can purchase large sums of money for a fraction of what it would cost to buy that amount of stock. It means that Forex investors tend to have more significant returns on their investments than stock investors; Forex investors tend to double their money every nine months, whereas stock investors take around three years to double theirs.
The reason for this is simple: Forex trading is not as volatile as stock trading. It is more similar to buying and holding an index fund rather than picking winning stocks. Making money with ForexForex is almost exclusively a function of how much you choose to invest, while the amount of time you hold your investment does not affect your returns (unlike in stocks).
Forex trading and stocks in Singapore are famous investment avenues for individuals who want to diversify their portfolios. In this article, we will compare these two investments to make an informed decision about where to invest your money.
Forex Trading
In forex trading, you buy a certain quantity of a foreign currency with another country’s currency or vice versa. You can do so by paying the ‘ask’ price, which is the price at which the seller is willing to sell one unit of the other currency (or ‘sell’), or by receiving the ‘bid’ price, which is the price at which the buyer is willing to purchase one unit of the other currency (or ‘buy’). The difference between the bid and ask prices is the spread, which is how much the currency dealer earns from each currency exchange.
Forex trading carries many risks, mainly if you are unaware of the market movements and how to read charts. Some financial advisers do not advise their clients from trading in ForexForex. However, ForexForex provides an excellent way for savvy traders with good knowledge of the market to make money quickly – by buying low and selling high. It means that profitable trades can balance the potential risk involved.
Stocks
On the other hand, stocks (also known as equities) represent ownership shares in a company.
There are two ways to take advantage of prices increasing over time
1) You can buy stocks at one price and sell them when they increase, making a profit.
2) You can also buy stocks at one price and receive dividends from the company as long as you hold your shares. The amount of dividends received is proportional to how many stocks you own in that company.
Both ways require that you know the companies in which you are investing. If not, you could buy at high prices or receive low dividends due to a lack of information about how well the business is doing.
As with forex trading, investing in stocks can also be risky. This risk is reduced by diversifying your portfolio among several different types of investment – for example, starting an S-account with Capitaland, buying small lots in many other companies, and holding onto stocks for the long term (at least 1 – 2 years).
In conclusion
It is difficult to say that forex trading or investing in stocks represents a ‘better’ form of investment.
Both Forex and stocks present good opportunities for investors with good knowledge and risk appetite, but only if they know how to manage their assets well.
With that being said, Singaporeans can quickly get involved in both investment forms. Home.saxo offers online trading at low costs.
