When the economy is volatile, there seems to be more advertisements for forex (foreign exchange) investment products, or strategies for making forex investments.

Dealing in forex investments through foreign currency futures or options can make sense for a business that has been forced to take on unacceptable currency risk. Futures and options let the business pass that risk on to speculators who wish to accept it. That’s the textbook explanation for the existence of futures and options.

Textbooks often fail to emphasize that most speculators who succumb to the lure offutures or potions wind up losing money. It doesn’t matter if they trade foreign currency or a traditional commodity, such as wheat. In the end, they almost always wind up losing.

Here’s how things typically work out: Suppose an investor starts out with the intention of losing no more than, say, $15,000. After a few months of trading on futures in forex investments (or anything else), the investor will typically have broken even on his futures trading — if you ignore commissions. But if you count commissions, which obviously have to be paid, the investor will have lost about $15,000.

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In other words, the futures trades work out like bets on a series of random events, such as coin tosses. You’ll win a few and you’ll lose a few, but you won’t win enough to pay your commissions, let alone leave yourself with a profit.

If you were to invest the same amount in a portfolio of stocks, you would spend only a few hundred dollars on commissions. This disparity gives futures and options brokers a huge incentive to recruit clients and try to pump up their enthusiasm and confidence.

Futures and options on forex investments or anything else offer a great deal of leverage. If you could get that leverage to consistently work for you, you would earn 50% to 100% or more a year on your initial stake. These days, we see lots of ads for books, seminars and software that purport to show how you can make that kind of return on a consistent basis. Some even go as far as to say you can do it in a few minutes a day.

This raises an obvious question: if it were possible to make that kind of return, why would anybody work?

Our long-standing advice is to invest in well-established companies and spread your funds out across the five main economic sectors: Manufacturing & Industry, Resources & Commodities, the Consumer sector, Finance and Utilities. Stay out of currency trading, penny stocks, new issues, options, futures or any high-risk investments. Although you may experience modest losses when markets drop, you should show positive results over time.