Regardless of the investment type, duration, or style involved, most people invest money into different vessels to build their wealth, whether it is short-term or long-term.
Some do it for the “nest egg” when they retire, while others have more short-term goals such as paying for education, buying a car, and so on.
Investment has been around for a very long time and it is set to rapidly increase because of the inflationary nature that currencies have, with more people hoping to beat inflation by placing their capital in something that will give them a higher return on investment.
Cryptocurrency investment and stock investment are two of the most popular types of investment that there are. Each has its advantages and disadvantages and both attract a different set of investors.
When considering which of the two will be better for your investment strategy, there are five things to consider.
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There are risks involved
All investments carry inherent risks and financial markets can crash for a wide range of reasons. Investors must weigh all the risks that they could encounter when they decide to add a security to their profile.
Individual stocks carry risks associated with their growth, dividends, and many others. On the other hand, cryptocurrencies are highly speculative assets and their prices are completely dependent on supply and demand, much like all other currencies.
Cryptocurrencies are not yet as widespread in terms of adoption and it is still a new investment vehicle that is being explored, adding a layer of risk because there is constant competition between cryptocurrency projects and one could easily be overtaken by another, or cryptocurrencies could be regulated from existence.
Despite the investment, retail investors need to consider their risk tolerance and seek professional investment advice before they invest in either stocks or digital assets.
There is Volatility and Growth
The prices on cryptocurrencies show significant volatility which is also followed by growth, especially in the case of Bitcoin and Ethereum, which have seen drastic increases in recent years.
Stocks do not often experience the same rate of growth. However, the stock market can be volatile as well, but not as severely as cryptocurrency markets.
As quickly as prices on cryptocurrencies can rise, they can plummet and often within a day. Stocks have long-term and historical support, with investors expecting their stocks to do well, earning them a return on the appreciation of stocks in addition to dividends that are paid by stocks.
There is a Void Associated with Ownership Rights
Stocks are often seen as a right to ownership, even if it is fractional. The ownership does not change until the owner of the stock sells their shares. However, in the cryptocurrency market, investors are given cryptocurrency coins that do not represent a legal stake in the organisation that issued the coins.
There are Transaction Fees
When investors buy stocks they must pay a transaction fee and while this is something that does not both larger investments, it is something that could eat profits on smaller investments. Fees to consider involve the brokerage service, the investment advisor, and several other stock trading fees.
Cryptocurrency investments can be extremely profitable because the transaction fees involved are significantly lower.
There is a perfect opportunity for Diversity
While there are differences in both investment options, there is one similarity in both that is a crucial consideration. This relates to the diversification of the portfolio.
There are thousands of companies that trade their shares across stock exchanges in the world, the same as there are over 13,000 different cryptocurrency coins currently in circulation, listed on most exchanges.
This offers investors a plethora of investment opportunities and the perfect opportunity to effectively diversify their portfolios and safeguard against inherent risks.
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