Best Investment Brokers in 2021
What Should a Beginner Investor Invest in?
Most Forex brokers offer their clients the opportunity to independently trade in the Forex market, but only a few of them have professional investment programs that allow them to receive long-term passive income.
Almost all Forex market investment programs are based on the principle that the investor does not carry out transactions himself, but copies the transactions of more experienced traders or brokers. Regardless of the type of investment program you choose, your profits are beneficial to the account manager or the trader if you copy their orders because a portion of their income is a percentage of your winnings.
This principle of mutually beneficial cooperation makes investment offers from Forex brokers an attractive option for investing. In 2021, Forex brokers tend to offer two types of investment programs:
Investing in PAMM accounts
A PAMM account is an analog of an investment portfolio in a classic fund. Such an account is opened by a professional trader, i.e., an account manager in the Forex market. Other traders or investors can invest their funds in this account and by doing so, they authorize the manager of the PAMM account to trade using their funds. The manager himself also invests an equal amount when he executes the transaction. Forcing the manager to invest in an equal amount with his clients, means that the manager will be more prudent in his trading decisions. If the trader’s forecast is correct, all investors who invested in that PAMM account will receive an equal profit, less the manager’s commission.
Investing in auto-trading
This method of investing is also called copy trading (copying transactions of veteran traders). As a rule, top Forex brokers have independent services for auto trading, but sometimes the functionality of regular trading terminals can be used for this purpose. Auto-trading allows a trader (investor) to trade using his own account but duplicating another trader’s strategy. This means that an experienced professional makes a bet, and you simply copy it to your account in automatic mode which is handled by an algorithm in the background. If the trade is successful, you receive a profit excluding the commission charged by the trader from whom you copied the transaction.
In other words, a PAMM account is a form of trust investment management, and auto-trading is a form of copying trading signals.
In 2021, a lot of Forex brokers also began to use a hybrid form of investment programs called RAMM (Risk Allocation Management Model).
Technically, RAMM accounts for investors combine the capabilities and functionality of transaction copy services and traditional PAMM accounts with managing traders. The difference is that when using a RAMM account you have to determine your own financial strategies for your trades. Therefore, the manager provides you with trading results, statistics, and other information that you may use to formulate your game strategy. Remember, there is no such option when using PAMM accounts because the account manager makes all the decisions.
Another feature of RAMM accounts is that the investor also independently and automatically sets limits on the amount of money to be spent in each transaction order, as well as the drawdown rate to close the transaction, etc. This makes it possible to save most of the invested funds if the account manager’s bid turns out to be unsuccessful.
In a RAMM account, the investor does not transfer his funds to anyone, unlike a PAMM account. The funds remain in the investor’s own account at all times and are frozen by the Forex brokers to guarantee the account manager a commission if his transaction is successful. That is why this form of investment is called a hybrid because the trader also becomes an investor, but his funds remain safely in his own account.
10 Best Investment Brokers for Beginners
When a trader decides to become an investor, he needs to select the best Forex broker with the most favorable conditions for investing. After all, there are hundreds of brokerage companies and many of them already have very favorable investment programs.
The broker’s experience and whether the broker is a member of a Forex regulatory agency are key factors to consider when assessing the reliability of a broker. Moreover, it is to be expected that the broker's experience is determined by the age of the agency. Therefore, we do not recommend cooperating with brokerage companies that were founded less than 3-5 years ago. They may well be promising and convenient for small investors, but a limited operating history in the global exchange market may indicate that the company is not yet competent to handle a serious financial event (such as a global financial crisis). A broker’s lack of experience could cause you to lose your entire investment.
Which Forex Regulatory Organization a broker is registered with will tell you a lot about the broker. Regulatory agencies are government-controlled bodies that are independent from brokers, traders, and investors. The regulator could be international (e.g., IFSC) or local (e.g., SIBA). Each regulator has its own advantages, but the key factor is that any broker that is a member of a regulatory agency is not a bucket shop or a promoter of a pyramid scheme. The broker’s membership in a regulatory agency assures you that it is legitimate; however, that does not, in itself, guarantee that you will not lose money with a broker.
We have included the best Forex brokers of 2021 for investors in the table below. The list is regularly updated and adjusted by the Traders Union specialists.
Types of Forex Investment Programs
We’ve already specified three main types of investment programs — PAMM accounts, transaction copy services, and RAMM accounts. Now let’s compare and contrast them while focusing on their advantages and disadvantages.
The PAMM abbreviation represents Percent Allocation Management Module. Legally, this is a form of trust management, because investors entrust their funds to the PAMM account manager. Although the account-manager uses the funds entrusted to him in the bidding, he cannot withdraw them or interact with them in any way. In other words, the PAMM system practically eliminates fraud on the part of the manager. The manager can still lose money because of a bad decision, and this is the main risk with PAMM (all) accounts.
Peculiarities with PAMM accounts
The manager is required to include his own funds in each order in equal amounts to his investors; that is, he risks exactly the same amount as each of his clients.
In a PAMM account, profit distribution depends on the account identified by the Forex broker. It has a total balance if it is a uniform account.
Upon completing the trading period, the profit is proportionally distributed between the manager and his investors based on their contribution to the funds used in the transaction.
Loss is shared between all investors and the account manager and the Forex broker automates (through the use of algorithms) the calculations and distribution.
The PAMM account does not guarantee profit for the investor. But if you are a novice trader or do not want to trade on your own, then investing with a broker an amount that you can afford to risk is a reasonable decision, especially since the broker does all the work and decision making.
A PAMM account is convenient because it provides the investor with passive income. You just need to replenish the deposit promptly to participate in successive transactions.
Copying of transactions (aka auto-trading) is another opportunity for investors willing to invest in a Forex broker’s management fund. In the case of auto trading, all the funds remain in your account, unlike investing in PAMM accounts. Your funds are not transferred anywhere and are not frozen. Only you are responsible for them and you also get profits, less a small percentage for the manager’s (sometimes called a “signal provider”) commission. You will also be responsible for any loses by the manager.
How copy trading works?
A professional trader may decide to earn extra money after successfully trading with a particular Forex broker by becoming a manager or signal provider while using the broker's platform and inviting other traders to trade along with him. In other words, he openly and voluntarily shares his transactions and strategies with other traders.
The investor logs in on the platform and obtains a list of managers/signal providers. The available information about the managers depends on the site. Usually, it is in the form of detailed statistics on transactions. The Forex broker must provide the investor with statistics that reflect his forecasts (strategies) for at least the previous 30 days.
After choosing the trader with the best record for the last 30 days, the investor copies that trader’s current transaction(s) (strategies). In other words, the signal provider’s order is duplicated exactly on the trader’s account and goes to the Forex interbank. The method is called “auto trading” because it works automatically via algorithms.
If the order is unsuccessful, the signal provider and all investors incur relevant losses. If the order is profitable, the trader and investors profit in the same amount (since the order was copied exactly). A fixed percentage (commission fee) for using the manager’s expertise (strategies) is withheld from investor profits.
Comparison of Investment Programs
|Comparison parameters||PAMM system||Availability of Auto copying|
|Choose of trader||Yes (account manager)||Yes (signal provider)|
|Funds remain on the investor’s account||No (transferred on PAMM account)||Yes (the investor simply copies someone else's order)|
|It is necessary to install additional software||Depends on platform||Depends on platform|
|Ability to halt trades at any time||No||Yes|
|Guarantees for investor||Yes (account manager must risk his own funds equally with his investors)||No (signal provider risks his own funds and the investor risks his own funds)|
|Extra bonuses||Depends on broker’s terms||Depends on broker’s terms|
|Profit||Proportional (the more an investor invests, the more he earns)||Fixed (since the transaction is fully copied, the investor earns as much as the provider)|
|Commissions||Proportional, as a rule||Fixed, as a rule|
|Transparency and control||Incomplete, as the manager makes all decisions without taking into account the opinions of investors||Complete, since all transactions and strategies of the signal provider are available to the investor|
|Income passivity level||High (the investor only needs to replenish the account/withdraw profit each time)||Medium (the investor makes decisions on each order)|
- •Funds can be managed and withdrawn (fines and commissions are free), excluding funds that are actually in the order.
- •You can successfully diversify risks by distributing funds between several PAMM accounts or of different account managers.
- •Although the investor is prohibited from choosing his own trading strategy, he can monitor the progress of trading in real-time, as well as review the history of the manager’s transactions for the last 30 days.
- •The legislation of some countries, such as the USA, provides for a special licensing regime for investor participation in PAMM systems. If the investor does not comply with this procedure, he cannot rely on legal protection from the state’s Forex regulatory agency in case there is a dispute.
- •Even the best Forex brokers for investors warn: PAMM accounts do not protect you from losses.
- •PAMM account managers can introduce various restrictions, e.g., not accept investments less than a certain amount. Account managers can also limit the number of participants who may join a PAMM account.
PAMM accounts have a lot of advantages because this is the easiest and most profitable investment option for a novice trader or for someone who does not want to trade for themselves. This is the most passive income option, but it does not exclude the usual risks of the Forex market. The real success of such investments depends on the expertise of the managing trader. Plus, there are bonuses if the investor is registered with the Traders Union.
- •You don’t need a financial background or experience in the Forex market to earn money, and the trader’s profit history and statistics are presented in easy-to-read charts.
- •There’s a huge number of providers with different trading styles to choose from. An investor can always choose a professional manager whose strategies impress him.
- •Risks are easily diversified by a simple capital distribution into several accounts. You can distribute an available deposit among an unlimited number of signal providers.
- •Unlike PAMM accounts, funds remain in your own account. You risk only what you invest. There are no third parties and extra operations to contend with, except for a commission to the fund manager on successful transactions.
- •Many Forex brokers copy transactions of veteran traders without charge unless there is a profit.
- •Long-term copy trading does not allow you to develop your skills as a trader/investor because you are forever relying on the fund manager to make decisions for you.
- •As in the case of PAMM accounts, even the best Forex brokers for investors cannot guarantee a profit when copying transactions. Even the most successful traders occasionally make bad forecasts, so your money will always be at risk.
This is a convenient and practical way to have passive earnings, which requires a little more attention from an investor than PAMM accounts. But there are more opportunities, cooperation is more transparent, and the investor never has to transfer his funds out of his account.
Risks Associated with Investing in Forex Market
Always be cognizant of the risks no matter what investment program you choose. The main risk of investing in the Forex market is that a trader whose transactions you are copying or a PAMM account manager can make a mistake and engage in unsuccessful bidding.
The only way to minimize (not eliminate) the risks is to distribute your funds over several PAMM accounts/signal providers or copy trading accounts.
How to choose the best brokers for long term investing
Our list of the TOP 10 Forex Brokers for Investors in 2021, as presented above, was created to help you make an informed choice and simplify your selection process. But it’s quite difficult to choose the right one even among these ten companies because they all are reliable and experienced. Also, each one has its own favorable conditions. Below are additional factors compiled by Traders Union that you can rely on to help you further narrow your choices of selecting the best Forex broker for you and your trading style:
Decide which system suits you best — PAMM or auto trading. This will automatically eliminate several Forex brokers.
If you want to work in a RAMM system, this further narrows your choices because not all brokers offer it.
Consider the minimum deposit. Avoid risking big funds while you are still a beginner.
Evaluate the functionality of terminals and services. All brokers offer substantially the same opportunities, but the interface of the terminals can differ greatly. Choose the one that is most comfortable for you to navigate.
Compare the average commission set by managers and signal providers among different brokers.
Evaluate the transparency of the work. Examine how accurate and detailed the information is about the manager/provider and their previous transactions.
Finally, select the manager/broker that best fits your needs and trading style. You can always change your decision or brokers later.
FAQs regarding the Best Brokers to Invest with in 2021
What is the difference between the typical Forex broker and other brokers for investors?
There are no differences. Today, almost all Forex brokers offer investment programs, some more than others, along with an expanded range of investment opportunities.
I have never traded in the Forex market, should I start with investing?
Starting with investments is a wise choice. It will provide an opportunity to gain experience and basic knowledge of the foreign exchange market by observing the work of an account-manager or signal provider.
Is it beneficial to change one investment system to another?
The best Forex brokers for investors in 2021, provide you with several tools and bonus programs. The convenience and advisability of changing the investment system depend on the platform you work with but you can always change to another system.
Why is it more profitable to invest through the Traders Union?
When registering through the Traders Union, you will not have restrictions, and nothing will change in your work. But you will obtain free legal support and financial bonuses, such as: a return of the spread; additional payments from the Traders Union; and contests with a prize fund.