If you’re currently considering investing your money into cryptocurrency or stocks, you might be confused about which one to choose and why. The stock market can feel more familiar if you’ve already invested in it, but cryptocurrency is newer and more exciting.
Here are some factors to consider if you’re trying to decide between investing in stocks or cryptocurrency — and why both should be an important part of your financial future.
Investing In Cryptocurrency
The Long-Term View: Investing in cryptocurrency can be rewarding if you have faith in its future—but a look at its past shows just how turbulent that path can be. Over short periods, Bitcoin has proven to be wildly volatile; and over longer periods… well, it’s still wildly volatile.
We may see one day where Bitcoin is priced at half of what it was today—or more! But for those who believe in its long-term success, investing now may prove to be incredibly lucrative years down the road.
December 2017 – Bitcoin hits $20K per coin! Your investment of 1 BTC back when it was worth less than $1 would now be worth around $240,000.
Investing In Stocks
The Dangers of Long-Term Investing in Stocks: One of your biggest challenges as an investor will be sticking to your plan and making sure you never make a trade that isn’t in line with your goals. But more than anything else, you need to be careful with how much money you invest in stocks. Investing in stocks isn’t like depositing money into a savings account—you won’t get it back if you don’t touch it for years.
Make one wrong move, and you could lose big time. Most investors would agree that investing in stocks involves some degree of risk. In fact, over time stock prices have returned about 10 percent on average annually — not even taking into account inflation. That’s not bad at all!
However, those returns can vary greatly from year to year depending on economic conditions and other factors outside your control — so you can never really predict what kind of growth (or loss) you might see from year to year.
When investing in stocks, there are many different kinds of things you should think about before pulling out your wallet: What exactly do I want my investment portfolio to look like? How much do I want my portfolio to grow each year? How safe do I want my investments to be?
Pros and Cons of Investing in Cryptocurrency
Despite all of its popularity, cryptocurrency isn’t always recognized as an asset class. An investment in bitcoin and other cryptocurrencies is inherently risky. Because cryptocurrencies are entirely digital and decentralized, they can be made vulnerable to hackers and government intervention.
The value of cryptocurrency can fluctuate greatly over short periods; for example, at one point in 2017, it dropped about 30% over just two weeks—and that was after rising nearly 1000% in less than 12 months! If you’re considering investing in crypto assets like bitcoin, know that there are many potential benefits to doing so (more on those below). But you should also recognize that it isn’t without risk.
As with any financial decision, consider what you might lose before deciding what you might gain. And remember: while your money is at stake when it comes to cryptocurrency trading, traditional investments come with their own set of risks—you could lose money if companies don’t perform well, if your stock portfolios decline in value due to unforeseen events, or if inflation continues rising faster than your returns.
Whatever kind of investment you choose depends on how much risk you’re willing to take and how much time your money will need to grow. Which is better: investing in cryptocurrency vs stocks? Ultimately it depends on how much risk you want to take—and what kind of future do want to build toward by doing so.
Pros and Cons of Investing in Stocks
On one hand, stocks are widely diversified investments. A single investment in an index fund covers thousands of companies. On that same note, owning so many diverse assets can be expensive and difficult to manage. While most businesses are reputable and run by professionals with strong track records, some do not perform as expected—or worse yet—they don’t perform at all!
Though they might seem like a safer bet because of their size and popularity (which comes with high liquidity) when companies fail due to poor management or unfavorable market conditions it can be very costly for stockholders.
Luckily there are ways to reduce risk: buy good funds from reputable firms. Alternatively, you could pick out individual stocks yourself. The problem with that method is you need to know your stuff; research takes time and knowledge about a wide variety of industries, which means you need substantial capital to get started.
That said, investing in individual securities does have its advantages: You’ll have more control over where your money goes and how it’s used; returns tend to be much higher than mutual funds; fees tend to be lower, and if you do your homework right you can beat even professional investors on occasion (but we wouldn’t count on it). So if you want control over where your money goes but want it with low-risk investment vehicles then check out index funds instead.
What Is A Good Return On Investment?
ROI represents a return on investment. It is calculated by dividing income from an investment by the cost of that investment. An ROI of 100% indicates that an investor broke even and earned back their initial capital; an ROI of 200% means an investor doubled their money.
So what’s good for your business? For starters, it depends on how much risk you’re willing to take on. Some investors want to reduce uncertainty and will choose investments with high returns relative to low risk. Others may be more comfortable with a strategy that takes big risks but also has high rewards — say 20 percent or greater when compared to lower-risk alternatives such as treasuries.
Crypto vs. Stocks: Which Should You Invest In?
Most people know that there are two major categories of investments: stocks and bonds. You’ve probably even heard of mutual funds, which are a mix of stocks and bonds. The difference between cryptocurrencies and traditional investment products is that you don’t buy them from an individual; rather, you’re buying from a company that specializes in these transactions (hence crypto exchanges).
That also means you don’t have ownership over what you purchase—it’s not like buying $100 worth of Facebook stock allows you to call Mark Zuckerberg for advice about marketing your new app. But at their core, both share many similarities.
They’re high-risk/high-return assets designed to grow over time. In other words, if you pick a good one, it could earn you millions. But don’t forget that cryptocurrencies and stocks can both lose value—or everything—in an instant. So which is better: crypto or stocks? And how do they stack up against each other?
Let’s take a look at four main criteria: A common question among new investors who are just getting started with cryptocurrency investments is whether they should try investing in just cryptocurrency alone (without also including traditional asset classes such as stocks and bonds) or whether to mix their crypto and stock investments by investing in cryptocurrency but keeping their overall portfolio diverse using some of their money to buy stock market securities too.
This can be a tricky question because there isn’t necessarily one right answer that works for everyone. So let’s take a look at four main criteria:
- Risk: How risky is each type of investment?
- Control: How much control do you have over your investment in either one when you invest?
- Profit potential: What are your chances of earning more from each option if you’re correct about future price movements?
- Convenience: How easy is it to buy/sell these types of investments and how fast do you expect them to trade?
Taking The Next Step
If you’re interested in investing in either stocks or cryptocurrency (or both), take some time to educate yourself on how each one works and which might be right for you. Both are risky bets that can lead to serious rewards if you know what you’re doing.
If there are any parallels between cryptocurrency and stocks, they’re highly speculative and could leave you worse off than when you started. If there’s one tip I can give based on my experience, it’s that it’s smart to start slow (particularly with cryptocurrency) so that if things don’t go well, it’s not your life savings at stake.