Lessons learned or lost?

In 2007, Americans saved a total of $57.4 billion. That same year, we spent $92.3 billion on legalized gambling.


Gambling, after all, is about putting up a small amount of money in the hopes of winning a large amount of money. (We grant you that there's also an entertainment value to it.) It's a high-risk, high-reward game. Sounds a little bit like Wall Street ... and how Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS) carried 25:1 leverage in 2007.


As the savings stats suggest, Main Street Americans took on too much debt without enough cash in the bank back during those heady housing boom years. We compounded the problem by taking unhealthy risks. We all know how that's turned out.


NOW
Sketchy "get rich quick!" infomercials are back in full force, data from online brokerages have shown that day traders are back in the market, and there's a new scheme that individual investors are trying out: currency trading.


...currency trading has big-time appeal to small-time investors. As the Journal noted recently: "Investors are typically attracted to currency trading because of the vast leverage available -- as much as 500 to 1. That allows an investor to put up just a few hundred dollars of capital to make a bet of tens or hundreds of thousands of dollars."

While [there] is some serious upside, consider this: The vast majority of currency trades are made by hedge funds, large corporations, and central banks. In other words, your counterparty in a currency trade is likely to be someone who is -- and this is important --vastly more qualified to make currency trades than you are. 


Your broker, however, will not tell you this. (Shocker.) The Journal notes that Citigroup(NYSE: C) and Deutsche Bank, among others, now have products to entice retail investors.


VIA: 
1. If you are concerned about the value of the dollar, there are positions 'investors' can take to diversify their dollar holdings (everything you own that is denominated in US dollars). Even 401(k) plans often have low cost options for this diversification.


2. If you are tempted to use currencies (and their leverage) to take advantage of the current trends, or you want to use the leverage they provide, don't. The risks of short term loss as a result of fluctuations of highly leveraged assets can be hazardous to your wealth.


3. VIA has no recommendation to buy, sell or trade currencies, as our view it is a hedge for companies that do business internationally, and a speculation not an investment for individual investors.


Contact us if you want to develop a strategy to deal with markets these volatile markets. We are especially well qualfied to help if you are within 10 years of retirement or in retirement.


Read the entire article on fool.com