Investing in real estate has both benefits and risks.There are various differences even in the same investment, but what is the difference between FX, which is popular as a supplementary income for office workers, and real estate investment? Forex is an asset management that takes advantage of the difference in exchange rates between Japan and foreign countries, and by using leverage, you can trade small to large amounts and earn profits in a short period of time.However, there are risks associated with this, and instability must also be considered.Let's choose the investment that suits you by holding down the difference in the possibility of taking risks.
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What is FX (foreign exchange margin trading)?
Forex is an investment where you buy and sell currencies and profit from the difference in rates.You can choose not only yen but also currencies around the world such as dollars and euros.
For example, if you buy a dollar at 1 dollar = 100 yen, and after 1 month it becomes 1 dollar = 110 yen, you will get a profit of 10 yen.If you bought 100 million yen worth of dollars ($1), your profit would be "10 yen".The foreign exchange market operates 24 hours a day, excluding Saturdays and Sundays, and can be traded anytime, anywhere on the Internet.
Advantages of Forex
The big advantage of FX is that leverage can be applied, and by applying 10 times leverage to 10 yen funds, you will be able to trade 100 million yen.This means that a 1% price move will yield a 10% profit.
Leverage varies depending on the broker, and domestic brokers are limited to a maximum of 25 times.Another advantage is that it is not affected by economic conditions such as yen appreciation or depreciation because it uses the difference in exchange value between the two countries.If you do it right, you can make a lot of profit in a short period of time.
In addition, each currency has a policy interest rate set by the country, so if you buy the currency of a country with a high interest rate and keep it, you will be granted swap points every day.Even if you have a deposit in Japan, it is 0.001%, so there is almost no change, but the US policy interest rate is 2.00% (as of September 2019). It will be a plus of 9 yen.
Forex risk
The disadvantage of foreign currency investment is loss of principal due to exchange rate fluctuation risk.Leverage is a great benefit, but it also comes with a proportionate risk.
Contrary to expectations, if the price fluctuates and the unrealized loss increases, the trader may execute forced settlement called loss cut at a certain level so that it does not fall below the principal.However, there are many times when the price movement becomes rapid due to the political situation in the world, and it may not be possible to make a loss cut in time.If the loss cut is not made in time, it will be fixed with a large amount of minus, and it is possible to suffer a large loss depending on the movement of the market price depending on the world economy.
In order to avoid such risks, it is necessary to constantly gather information and study about global economic trends.In addition, since investments are made online, there may be a difference between the price when the order is placed and the actual execution price (slippage risk), or system trouble may occur.
What is real estate investment?
Advantages of real estate investment
On the other hand, real estate investment can be said to be a relatively stable investment.You don't need the ability to read the world economy or market prices in real time.
Since there are tenants, you can earn stable income every month in addition to your main business, and it is a big advantage that you can generate stable and long-term income.
It is difficult to generate a large amount of profit in a short period of time like forex, but there is almost no sudden change in land prices or rent, and there is almost no risk of sudden price drops and loss of principal. The risk of suddenly incurring a large amount of debt is also low.In addition, it is easy to avoid risks such as vacancies and delinquency by selecting a rental management company in advance. There are very few situations where this is not the case.
It is a great advantage for beginners to be able to receive advice from a professional's point of view in this way.
Related article:What is the appeal of real estate investment? Explaining 4 benefits for beginners
Real estate investment risks
The risk of property investment in real estate investment is that you will need funds of several million yen at the beginning, and if you cannot buy a property of tens of millions of yen at once, you will need to make a real estate investment loan.
After purchasing, there are risks such as troubles between tenants, rent arrears, and the cost of repairs and renovations due to aging of the property.If income decreases due to a drop in income due to vacancies, cash flow will be difficult if the income is used to repay the loan.The most scary thing is the risk of vacancy, so it is necessary to carry out small-scale repairs on a regular basis so that deterioration of the property can be suppressed even a little and it can be maintained as an attractive property that makes people want to move in.
Related article:Differences in perceptions and risk aversion that are common to those who want to start investing in real estate
Related article:The most scary vacancy risk in real estate investment.What are the measures and characteristics of properties that tend to be vacant?
Is FX recommended for beginners in asset management?Real Estate Investment?
There are risks in any type of asset management.
Forex is high risk but requires high return in the short term, while real estate investment is medium risk but requires medium and long term return.
If both real estate investment and FX are successful, you can bring out the best in each, but knowledge and planning are required.Depending on your financial strength, there are things you can choose and things you can't, but let's start after carefully considering the risks and determining whether it suits you.
Summary
- The advantage of FX is that it is possible to generate a large amount of profit in a short period of time
- The risk of FX is that there is a possibility of carrying a large amount of debt in an instant
- The advantage of real estate investment is that you can earn stable income every month, and you can earn stable and long-term income.
- The risks of real estate investment include the need to take out a real estate investment loan and the risk of vacancies due to aging.
At Rich Road Co., Ltd., we will consistently support all aspects of investment real estate, from complete beginners to experienced people, from a wide range of real estate selection, loan consultations, post-purchase management, and renovations.
