REITs, or Real Estate Investment Trusts, are quickly becoming a popular investment option today – but how do REITs stack up against the profit potential of Forex trading?
When deciding on an appropriate investment option for your hard-earned money, there are several potential options to choose from, including REITs (Real Estate Investment Trusts), and currency trading on the Forex marketplace. While they both have their strengths and opportunities, it is important to understand the basic differences between these two investment options in order to make an informed decision that will drive profits and minimise risk. REITs are companies that own and generally operate income-producing real estate locations. From apartment buildings to office complexes, hospitals to warehouses, shopping centres to hotels, and even natural open spaces that provide revenue opportunities, these companies operate in a similar manner and structure to a mutual fund, while allowing for a diverse investment vehicle that plays on the power of real estate. Many of these companies seek out retail storefronts in order to drive revenue, but some industry analysts feel that this is an often overused angle as the e-commerce space is quickly eroding brick-and-mortar store location viability.
Forex, on the other hand, refers to currency trading through an interconnected marketplace. The ultimate goal revolves around trading pairs of currencies and playing their respective values off against each other to realise a more profitable position at the end of the trade. Forex trading can be conducted at a lightning speed, with traders often using daily news events and market releases to drive currency trades in a real-time manner, while investing in a REIT involves more of a long-term position that requires significantly less input from the account holder. Understanding the key differences between these two investment choices is important, so let’s delve a little deeper and uncover some of the pros and cons of both REITs and currency trading.
Marketplace access: The Forex marketplace operates on a 24 hours a day cycle, 5 days a week. This means that at any point between Monday and Friday, regardless of the time of day, a trade can be placed that will initiate a currency swap through the Forex marketplace. Why is this important? Simple: currency fluctuations are constant, and changes throughout the world such as global news events, political unrest, and even weather can cause a change in currency valuation. Having access to an around-the-clock marketplace enables the trader to make quick decisions without having to worry about market reaction during the opening bell the next morning. REITs, on the other hand, are generally held as longer-term investments that don’t require frequent input from the trader. In fact, for the investor who wants to make a purchase and forget it, a REIT makes sense. According to TheStreet.com, though, most REITs have returned just 5-6% over the past few years.
Simplification: REIT investing is incredibly simple. Just like purchasing a share of stock, investors can purchase a share of a real estate investment trust that will provide them with a slice of any profits recognised by the holding company. This makes it quite easy to diversify an investment portfolio, and investors are generally able to select from among specific sectors of the real estate market – like apartment buildings, commercial properties, shopping centres, and more. Forex, on the other hand, can deliver significantly greater returns because it involves more input on the part of the trader. Forex traders don’t simply buy a share of something, they purchase a currency position and must have a crystal-clear understanding of how that position may move based on external market factors. This means that Forex trading is slightly more involved than purchasing a share of a REIT trade, but the upside is significantly higher.
Leverage: One key difference between Forex trading and investing in a REIT is the concept of leverage. Forex trading often enables significantly higher leverage ratios than other types of investments, and that means that a newer trader can invest small sums of money upfront, while allowing that money to increase the potential for significant profits. However, it is important that investors approach leverage in an intelligent manner, as highly leveraged trades can cause significant fluctuations in trading accounts – even with only minor currency valuation shifts.
Risk management: Due to the fact that trading currencies through the Forex market is a much quicker and reactive process than investing in a REIT, traders have an ability to hedge risk by keeping close tabs on their investment 24 hours a day. Additionally, automated trading platforms enable the Forex trader to set a margin call if the potential for losses outpaces the amount in the trader’s related investment account. Though Forex trading can be significantly more dynamic and involving than investing in a REIT, there is a measure of risk mitigation that is undeniable.
When providing guidance as to the best investment opportunity for an individual, there simply is no right answer. Is Forex trading better than putting money in a REIT? Maybe, maybe not! The true difference comes down to the individual trader, his/her level of risk tolerance, the short and long-term financial goals, and how involved the trader wants to be in his/her choice of investment. Forex does provide a 24 hour marketplace that enables real-time trades with minimal risk of slippage, which virtually guarantees that target prices are achieved at all times. Plus, the liquidity of the Forex market eliminates any challenges centred on executing a currency trade. All in all, REITs have their place within a smart investor’s portfolio, but they certainly shouldn’t comprise the entire account. Forex trading can drive significant profits in a short period of time, and should be considered a part of any savvy investor’s portfolio. The important factor is partnering with a reputable and reliable Forex trading group that can help provide the education, support, and technology necessary to win in the currency market.