We’ve seen all the Super Bowl commercials this year. Cryptocurrency is the new hot thing, and everyone is talking about it. You may be wondering if you should invest in cryptocurrency instead of stocks.
Perhaps the answer isn’t a hard yes or a hard no.
It’s important to remember that stocks and cryptocurrency are two very different investments. Cryptocurrency is still a relatively new investment, and its future is uncertain. The stock market, on the other hand, has been around for centuries. It’s a more stable investment and offers investors stability and security.
Have you ever heard about diversifying your portfolio?
What does it mean to diversify your investments?
Diversifying your investments is one of the smartest things you can do for your financial future. You don’t want to put all your eggs in one basket.
When you diversify your investments you are spreading your money out into different securities. This way if one investment fails, you haven’t lost everything.
Typically you break it into a percentage of risks.
If you are someone who is comfortable with taking risks, you might have a portfolio that is 30% in more stable stocks (such stocks in the S&P 500 for example) and the other 70% in riskier stocks (such as tech start-ups).
On the other hand, if you are someone who doesn’t like to take risks, you might have a portfolio that is 60% in more stable stocks and the other 40% in riskier stocks.
Cryptocurrency vs. the Stock Market
Cryptocurrency is currently a very unstable investment. Crypto can go up or down in value in a very short amount of time. Because of this rapid growth and decline, there is good investment money to be made. That being said, there is also a good chance of investment money being lost.
The stock market, on the other hand, has been around for centuries and is a more stable investment.
When you invest in stocks, you are investing in companies. These companies have products and services that people need and want. They are making money and will continue to make money.
An example of a company that you might invest in is Coca-Cola. Coca-Cola has been around for over 130 years and has a product that people will always need: soda.
Cryptocurrency, on the other hand, is not backed by anything. There is no guarantee that it will be worth anything in the future.
Here’s a good beginners guide with more on investing in stocks & crypto.
The Benefits of Cryptocurrency
That being said, there are some benefits to cryptocurrency.
One of the biggest benefits is that it is not regulated by governments. This means that you can use it to send money anonymously across borders without having to go through a bank.
Another benefit is that it is very easy to use. You don’t need a bank account to use it and you can use it to buy things online.
In addition, since cryptocurrency is new, there is the potential to make a lot of money off of it.
The Risks of Cryptocurrency
As with anything, there are risks involved with cryptocurrency.
One of the biggest risks is that it is not regulated by governments. This means that if something goes wrong, you have no one to help you (such as the SEC).
Another risk is that it is very volatile. The value of cryptocurrency can go up or down very quickly.
In addition, since it is new, there is no history to show how it will perform in the future.
Also, if you are a broker or an advisor thinking about recommending cryptocurrency to your clients, be sure to read FINRA’s Investor Alert on the subject. You could find yourself in need of an SEC defense lawyer if you make risky investments in cryptocurrency without fully informing your clients of the risks.
The Benefits of the Stock Market
The stock market also has benefits.
One of the biggest benefits is that it is a more stable investment. The value of stocks doesn’t go up and down as quickly as the value of cryptocurrency.
Another benefit is that you can make money off of it in two ways: through capital gains and dividends.
When you sell a stock for more than you bought it for, you have made a capital gain.
When a company makes money, it might give some of that money back to its shareholders in the form of dividends.
Dividends are typically paid out quarterly.
The Risks of the Stock Market
Just like cryptocurrency, there are risks involved with the stock market.
One of the biggest risks is that you can lose money if you sell a stock for less than you bought it for.
Another risk is that the company might not be doing well and might go bankrupt. If this happens, you will lose all of your money.
A Good Stable Investment Portfolio in the Stock Market Helps You Take More Future Risks
So, why should you still invest in the stock market given that crypto looks so appealing?
Having both stable investments in your portfolio can help you take on more risks in the future. The stock market can provide that stability.
When you have a nice investment nest egg in the stock market, you can feel more comfortable investing in something like a cryptocurrency that has a higher potential for return, but also comes with a higher risk.
Investing is about making tactical and strategic decisions to give you the highest probability of success. When you invest based purely off of emotions you are no better than the gambler heading to the casino.
Yes, it is a good idea to invest in something new that you believe in. But don’t forget about the tried and true methods that have worked for generations. The stock market still holds a lot of potentials, especially as an investment in a more volatile world.
The Choice is Yours
In the end, the choice is up to you.
Do you want to invest in a more stable investment that has been around for centuries or do you want to invest in something that is newer and has the potential to make a lot of money?
Be sure to choose whatever works best for you and always do your research before investing.
A happy mom, professional article writer, SEO practitioner, blogger, guest blogger & freelancer. She’s in digital marketing since 2018. She loves reading books and spend time with her family. Reach her on Email