Forex Trading Vs Real Estate Investment
By: Real Estate
Tags: Investment Opportunities, Forex Trading, Real Estate Investments

With the world entering the digital age, people now have a myriad of investment opportunities available just waiting to be discovered. Investment in the right industry can be a life-changing decision, which is why each option should be thoroughly evaluated. The two best options for investment in Pakistan are real estate investment and Forex Trading. However, each type of investment has its pros and cons which gives them precedence over the other. To help you make the right decision for your investment, we shall provide an analysis of forex trading vs real estate investment.

Real Estate:

Real estate is one of Pakistan’s most lucrative investment opportunities, amounting to almost 70% of the country’s GDP. Investing in this industry is a time-honoured tradition, offering several tangible benefits that can drastically change one’s life. Real estate consists of dealing in land and property, including buildings, roads, structures, and fixtures. It can be further divided into types such as land, residential, industrial, and commercial, and each type offers several investment opportunities.

With the boom in population, increasing demands, and lax regulations on buying property; the country’s real estate market is set to be at an all-time high, making it one of the best opportunities for you to invest your hard-earned capital in. However, despite the immense benefits the industry offers, there are a few cons that cannot be overlooked.

Pros of Real Estate Investment

When done correctly, investment in this sector can offer some major perks. Ranging from equity to a passive cash flow, real estate can be a game-changer. Real estate investment offers the following benefits:

Protection against Inflation

Other types of investment are heavily affected by inflation. However, investing in a property serves as a barrier against inflation since the value of your investment property will also rise along with other inflating prices. If home prices increase, rent will also follow, ensuring you still get the same amount.

Build Equity for the Future

Once you own a property and its value starts to rise, you start building up equity which you can tap into later to cash out on. This includes putting up your investment property for sale to either buy another property or just to cash out the value as a retirement fund.

Passive Cash Flow

If you are looking for a reliable, consistent income, renting a property can be a resourceful option. It offers a guaranteed passive cash flow that can serve as additional savings. You can either reinvest this capital, save it for emergency uses, or use it as a retirement fund; the choices are endless.

Cons of Real Estate Investment

Despite the immense benefits that the industry offers, there are a few cons that cannot be ignored. These factors certainly do not undermine the benefits; however, their effects can result in a few losses.

Requires Immense Capital

Unlike other types of investment, real estate requires a considerable amount of capital upfront. Property is not cheap and it can potentially require loans as well. If you are unable to pay the money in one go, paying in instalments is also an option. However, it drags out the process of obtaining the property, making it a less desirable option. Overall, investment in this sector can force you to dip into your cash reserves.

Low Liquidity

Money invested in the property gets much harder to access. If you want to access your equity money, you will have to list the house, market it, sell it, and then wait for the closing. Under normal circumstances, this is not much of a problem. However, if you are in a hurry, this slow process can become detrimental.

Localized Market

The returns you get will be highly dependent on the market you choose to invest in. This requires careful research to ensure that you choose the right property to avoid losses.

Forex Trading

The Forex market or the foreign exchange market is where currencies are traded. This is an essential part of any country as this allows people to purchase services and products locally and in other countries. Simply put, forex trading involves buying one currency and selling another, while the rate of exchange fluctuates continuously depending on supply and demand.

Forex Trading can offer some superb benefits to investors. However, with every benefit comes to a drawback that must be addressed.

Pros of Forex Trading

For those that are experienced in Forex, this investment can be a life-changer. Forex trading offers the following benefits:

High Liquidity

High liquidity means that your asset can be converted into money quickly. Forex trading is one of the few investment options that offer quick access to liquidated funds. Money moves in and out of currencies without major spreads, meaning there are no large price deviations.

Low Costs

Forex trading is very cost-friendly, as most of the transactions and dealings are done electronically, meaning there are no overhead charges. Furthermore, there are no commissions or cuts for the middle man meaning you can tap into this vast investment opportunity without worrying about extra charges or fees.

Low Capital Requirement

Unlike real estate investment where massive amounts of capital are required upfront, Trading can easily be started with just a small amount of capital. With a high leverage factor, forex traders can easily convert their small investments into high returns. Despite the risks with such high margins, if the right forex trading strategies are employed, the profit potential is through the roofs.

Cons of Forex Trading

Even though the market offers huge benefits, there are a certain number of cons that should be addressed as well. The following are some cons of forex trading:

High Risk

With high leverage options — up to 50:1 — profit/loss margins are immensely magnified. Despite offering higher rewards, the risk of losses is also increased. If you enter the market without proper knowledge and guidance, forex trading can turn into a loss-making ordeal.

High Volatility

As currencies are highly volatile, their values can increase or decrease in a blink of an eye. If one currency devalues significantly, it can soon turn into a nightmare for its holders.

The Bottom Line

The discussion of forex vs real estate is vast. However, the bottom line is that both investment options provide immense benefits and returns, yet both have their pros and cons. Forex Trading can be a splendid opportunity for those looking for a short-term investment, while real estate offers a more long-term approach for investment. Overall, the safer option remains with real estate investment as property values will always appreciate, and it can also become a source of passive income, while Forex trading is highly volatile and has a high risk/reward ratio. If there is no urgency and you want to invest your hard-earned capital, then real estate investment should be your top priority.