Forex vs. Real Estate: Honing your Investment Portfolio in 2015

Mon, Apr 27, 2015

Financial Advice, Investment

When creating an investment portfolio, there are two key elements to consider.

The first is your own unique philosophy as an investor, which should dictate your approach to wealth and your appetite for risk. Secondary to this is the state of the financial market in question and the wider economy, each of which will impact heavily on the performance of individual investments and their profitability.

In the current economic climate, forex and real estate arguably represent the two most popular investment options. With this in mind, it is worth comparing these two options both in terms of their fundamental values and how they rate in a constantly fluctuating global economy. For example: –

The Fundamental Differences between Forex and Real Estate

In fundamental terms, the main difference between forex and real estate revolves around the ownership of assets. While the currencies traded through online brokers and forex trading platforms are derivative products that do not require ownership, for example, property represents a physical asset class that is owned directly by the investor. The result of this is that currency traders can generate a profit regardless of how they their chosen currencies perform, whereas real estate investors are bound by the value that exists in their assets and the market as a whole.

The flip-side of this is that the forex market is decidedly more volatile, as margin based investments can cause you to lose far more money than you originally wagered. In contrast, real estate investment is relatively stable, as while the value of the market can decline significantly the property portfolio in question will always serve as a source of wealth and value. This is where your philosophy as an investor comes into play, and those with a healthier appetite for risk may be inclined to prefer the forex market.

The Current Market and Final Thoughts

In terms of the current market, you may be forgiven for thinking that real estate offers the most viable investment option. If you take the British market, for example, growth in the London market has been pronounced for the last eighteen months and is set to have a huge impact on the course of the countries upcoming election. This is part of a global trend, and the growth of the international real estate market has created a tremendous opportunity for investors to diversify and expand their portfolio in 2015.

This does a disservice to the underlying nature of the forex market, however, which despite regular fluctuations always manages to offer considerable opportunities to investors. Take the current market, for example, where the U.S. Dollar (USD) is performing extremely well and continues to dominate against the British Pound. This creates a bullish position from which investors can profit, whether they back the continued rise of the USD or hedge against the performance of alternative currencies. With considerable liquidity alongside this type of flexibility, the foreign exchange always offers considerable merit to investors.

 

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