Trust management is one of the ways to generate passive income from foreign currency exchange on Forex. At first glance, it only has undeniable advantages and virtually devoid of drawbacks. Investor should only choose wisely a managing trader, whose professional trading skills grant a profit of 200 to 300 % per year.
However, in reality, the situation is somewhat different. Selecting the alternative option for capital increase through the trust management investor should understand what risk he puts it. Facts of abuses by brokerage companies in this area are frequent enough; it is difficult for the investor to prove his innocence in the case of a conflict situation. Biggest investors, who invest in trust over 100 000 USD, are at the biggest risk.
There are two ways to generate income from the trust management. In the first case, you can choose managing trader through applying for working with him in the brokerage company that provides such services, without interfering with the relationship of the parties. A major risk factor in such a scenario – the probability of losing the deposit by trader. Trust management can be done by employees of the client brokerage company itself. This option is fraught with a lot of troubles, i.e:
1. Understating the profitability level. Most often, all the risks on Forex are borne by the investor and the real profitability hiding. Many dishonest brokers indicate only half of the actually received profit.
2. Using the customer’s money for their own purposes. Some unscrupulous brokers engaged in the issuance of short-term loans at the expense of investors. This may explain the occurrence of long delays in payments. Dealing centers becoming rich at the expense of their customers, because the amount of large investments is millions of USD.
3. Money takeoff. Not all brokers allow investors to fully withdraw their deposits. Customer support of unscrupulous firms can tell you that the application for withdrawal hasn’t been received, and the money in the account were lost by a trader as a result of losing trades. If an investor wants to make a safe withdrawal of their investments, it is necessary to terminate the contract in the broker’s office and fix the remaining amount in the account. In this case, it will not be able to deceive an investor.
4. Stock-market game at the expense of the client. In this case, the investment used to purchase impaired assets for resale after the price increase. If their value does not increase, then the investor’s capital may be reduced.
Thus, trust management – is a quite risky way to invest. To get more control over their investments, it makes sense to choose the PAMM accounts.