Investing in the PAMM account has long been one of the most popular types of investments. High returns with a low entry threshold are the main advantages of this type of investment.
In this article next question will be answered:
What is PAMM account?
What are the advantages and disadvantages of this type of investment?
What is MAM account and how do they differ from PAMM accounts?
How profitable to invest in Forex?
PAMM Account: What is This?
In the network, you can find many definitions of this term, so we will not focus on deciphering the abbreviation, but we will define it in our own words.
PAMM account is a service that allows profitable traders to attract additional funds in their management and fro investors it allows to invest money and receive passive income. This is one of the most profitable and affordable types of investment, but at the same time, it is also very risky. The profitability of PAMM accounts is several times higher than in other types of investment.
Investing in the PAMM Account: Advantages and Disadvantages
Main advantages of PAMM accounts are:
- Easy access. Now practically all brokers have their own PAMM systems, which give an opportunity to invest and get profit. You only need to open an account and connect it to the PAMM account, which you liked the most. After that, your money immediately begins to work;
- The minimum deposit. Most brokers have a very small initial deposit to connect to PAMM accounts. So, many companies allow to start even with $10;
- High profitability. PAMM accounts are considered the most profitable type of investment. Very often you can see accounts with a profitability of more than 300-400% per year, and some even show 800%!
- Low performance fee. Given the great competition among fund managers (especially in large PAMM systems), many traders reduce their commission to increase the number of investors. So you should not be surprised if you see that the commission of the manager is 20% or 30%;
Add to these advantages crazy advertising, and you get one of the most popular and promoted types of investment.
But not all that gold that glitters! Let’s see what are the disadvantages of this service:
- PAMM accounts are banned by serious regulators, as a consequence this service can be only provided by offshore brokers without regulation. From this emerges the second minus:
- Complete lack of regulation and protection of investment funds. 0 reliability! Trading or investing in offshore companies, you literally give money to unknown people who can dispose of them as they want! You are completely dependent on them and in case of any problems, you do not prove anything to anyone. You have nowhere to write a complaint;
- 99% of offshore companies are “bucket shops”. And then we return to the main problem – trading and, especially, investing in “bucket shops” almost always cause a total loss of deposit. How can you earn with the help of a company that earns only from your losses? A rhetorical question. You, sooner or later, will become a victim;
- Lack of detailed information about the manager. You absolutely do not know who is hiding behind the nickname. Perhaps there is a real person, but maybe another front man. You will never get a 100% reliable answer;
- Impossibility to check statistics. You see only the yield curve and the minimum statistics. It is elementary to fake this info (actually I never trusted any monitoring). Accordingly, you trust your money to a person who probably does not exist, based on statistics that can easily be fabricated. There’s nothing more to say …
- Super profitability = loss of a deposit. Many companies play on the greed of people, so it’s no wonder when you see how people invest in traders with a return of 400% per year. Even the largest hedge funds can not boast such a profitability. Nothing bothers you at all? In addition, you should understand that in trading risk and profit concepts are interrelated: the greater the yield, the greater the risk. So do not be surprised when an account with a 400% yield fully goes down! Thus, we have the following disadvantage:
- No loss limitation. If the account is lost, you lose everything. Therefore, your risks initially do not correspond to the possible profit.
Given all of the above, it becomes clear that investments in PAMM accounts, are sooo much risky. Thus, this type of investment is suitable only for the crazy, who are in the pursuit of super profits and ready to risk everything.
Unfortunately, this applies not only to PAMM accounts, but also to any investment decisions that offshore companies offer. Whether it’s a PAMM account, copying signals, investing in some services/investment programs or full support by a company employee/analyst. Our company has already been approached by people who have lost all their investments, and some even took all their property or took out loans.
If you do not want to play with fate, I strongly recommend you to be extremely careful when investing in such products.
But there is also a more reliable alternative to PAMM – MAM account. MAM (multi account management) is a service that allows the managing trader to trade on the accounts of all his investors simultaneously.
What is MAM Account and How Does It Differ from PAMM Account?
In a way, this is an analogue of PAMM accounts offered by many foreign licensed brokers. Both services help traders to effectively trade on multiple accounts simultaneously through one terminal. The trader sees the total amount of investments and trades both on a normal account, and the system independently allocates risks, volumes, etc. In addition, the commission of the manager is accrued automatically after the end of the calendar month. Both PAMM and MAM accounts are very common and generally available: almost everyone can open them, having met the minimum requirements.
It is also worth highlighting the differences between these two types of accounts:
- MAM accounts are not public, i.e. you can not get any information about them, nor their statistics (so even such a strict regulator as the FCA permits them). Broker companies with an FCA license (for example) can not give you an investment advice and influence your trading decisions. You will need to find the profitable manager yourself, study his statistics and then you can open the MAM account and work through this service;
- MAM accounts do not require the manager’s capital. A trader has the opportunity to connect his funds to the trading account, but this is done at his will;
- Before the investor connects his account to the MAM account of the manager, they must fill out and sign a contract that gives the trader the right to dispose of the investor’s funds, and also fixes the main terms of cooperation;
- Some brokers provide an opportunity to establish a loss limitation, i.e. when a certain drawdown is reached, the account is blocked from trading. This allows the investor to be more confident in the safety of his deposit;
The first difference (confidentiality) is the most important stumbling block and makes the PAMM account much more popular than MAM. After all, in all the videos, banners and other advertising brokers emphasize that it is so easy to use the PAMM service: went to the site, chose managers (preferably with a profitability of 100500% per year), connect to them and enjoy your life!
ALL! YOU ARE RICH! .. but … NO!
First, there are not so many good traders. According to the latest statistics, only 0.16% of day traders are profitable during a year or more, i.е. within 1 year, 99.84% loss money or begin trading in minus. When you go to the PAMM-account, there is a whole scattering of “talents”!
400%, no 600%, no 800% per annum! What kind of nonsense? I believe that there are accounts with such statistics, but they “live” for a month or two. When I see that accounts with such a profitability during a year or two, I have a reasonable question: why this trader does not sit on Wall Street, drinking expensive whiskey and managing billions, but trading in some offshore office where every “homeless person” with $ 10 can connect?
70 – 100% is a very cool result, which can be achieved without overstating the risks. 400% always have one result – disaster!
Familiar guys who worked at a well-known company MMSIS, said that all statistics of their “super” traders were drawn in Photoshop. As things stand in existing brokers, it’s difficult for me to say, but personally I would not risk!
Even if there are real traders who are really good at trading (for example, 70% per annum with a maximum drawdown of up to 20%), they will not be super popular (immediately so accurately). The whole reason in the greed of people, because most people will choose 400% profitability with large risks rather than 70% with low ones.
It’s funny to you? Not to me. I’ve seen many people who lost their money on Forex due to inexperience, deception and greed
From the foreign practice I know the real situation when a representative of the broker contacted the successful and untwisted PAMM-box and offered a deal to the “devil”: either he merges the account himself (and receives % of the plum), or the broker does it, and he remains with nothing.
The choice is obvious!
Remember, investing in offshore brokers that offer a PAMM account, you can never provide yourself with a truly stable passive income in the long term.
So we came to our main question.
How to Correctly and Reliably Invest in Forex: PAMM Account, MAM Account or Asset Management?
I hope you have finally realized that investing in PAMM accounts is ungrateful (I do not exclude that there are single success stories of investing in a PAMM account, but in my practice most of the investors in PAMM services have a sad experience) and you should not try your luck again.
What to choose: MAM account or asset management? In fact, these are two related concepts, since investing in MAM accounts is one of the options for asset management. At the same time, asset management can have the form of an ordinary investor account, which transfers access to it to the managing trader. In this case, the investor is assigned the task of distributing profit and controlling risks (in part, this is done by the trader).
Thus, MAM accounts are the most convenient tool for investing in Forex.
But not everything is so simple. As noted earlier, brokers (in most cases) will not give you data on fund managers who have MAM accounts in their company, so you will have to look for a profitable trader by yourself. Unfortunately, it is rather difficult to do this. % of successful traders in the long run is very small, and if you do not have enough experience in investing, then you can easily get to the scammers.
In addition, you need to choose a reliable forex broker, who not only provides MAM accounts, but has a solid regulation and is not a “bucket shop”, which is an important condition for successful investing.
FxAdvice will solve all these problems for you. We will not only help you to find good traders, we have already found them, checked them and are ready to provide their detailed statistics for all interested investors.
- The yield for 2016 was more than 60%.
- The maximum allowable drawdown is 20% (on a case-by-case basis, a drawdown limitation of 10% or 15% is possible).
- The trading strategy is mixed (algorithmic trading under the supervision of traders).
- The minimum investment amount is $ 5000.
- The minimum investment period is 3 months. After that you can at any time terminate the contract and without any problems withdraw your money.
More detailed information can be found on our website on the page – Asset Management.
- Our traders have more than 7 years of successful trading in Forex;
- More than 3 million dollars have already been invested in our portfolio.
- All accounts of investors are held in British STP broker with an FCA license and are insured for £ 50,000 in case of bankruptcy of the company.
- The account is monitored through an investor password – you are always aware of the situation with your money.
For more information about our asset management service, please leave a request on the site or add me in Skype – vovkfx.
In the comments, share your experience or opinion on investing in a PAMM account or asset management in Forex.
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