Sooner or later, there comes a time in everyone’s life when we think about how best to invest our savings. No matter how little money you have, it’s never too late to start making money work. Whether it is a simple pension fund, or a mixed package of shares and assets, your money should always provide the best return on investment.
Dilemma when choosing an investment
However, investment opportunities change over time due to a variety of factors, including political, technological, and cultural trends. Experienced investors keep an eye on emerging markets, and constantly diversify their portfolios to suit the current climate. The most recent disruptor of old stereotypes to hit the financial world has been Bitcoin, a new type of digital investment taking the world by storm.
Bitcoin is part of a new class of assets known as cryptocurrencies that securely store monetary value in a digital format. Despite the fact that these assets do not have a physical form, they maintain value through advanced technologies that ensure their scarcity and keep them safe.
How does the crypto differ from traditional stocks
If you are not well versed in the technology and fundamentals of cryptocurrencies, it will be easier to think of them in the same way as other assets, such as stocks or bonds. However, behind the scenes, cryptocurrencies function quite differently from stocks, especially Bitcoin. Despite the fact that Bitcoin was conceived as digital money, it began to act more like digital gold than as a currency. Thus, it acts differently with both stocks and foreign exchange.
While the share price is directly related to a company’s performance, Bitcoin has no shareholders, no CEO, and no affiliation with any country or government. This puts it in a league of its own – a completely unique method of securely storing and transferring value without the use of a broker, bank, or third-party intermediary.
Traditional investors may be concerned about the lack of mediation, but it has many advantages. Like gold, Bitcoin is immune to inflationary methods that damage the fiat currency, or insider trading that can damage the company’s value. Bitcoin offers the same “hard money” benefits as gold, but in a more secure, easily transferable digital format.
David Stein, a former chief investment strategist and portfolio manager at an investment fund, said the Cue Ball lacks the predictors that stocks have.
“Crypto is a speculative, completely supply-and-demand-driven asset,” Stein said. “All currencies depend to some extent on what people are willing to pay, but with cryptocurrencies like Bitcoin, it’s different. Unlike other currencies like the dollar or gold, this is a much smaller market compared to the overall size, so it is more susceptible to strong fluctuations.”
Currently, you can buy cryptocurrency in various ways: directly from a seller, on an exchange, through an investment fund, or as part of a product. Thousands of financial institutions are starting to offer their clients cryptocurrency investments so that they can benefit from this fast-growing new asset class.
Key Differences between Stocks and Cryptocurrencies
- Opening hours: cryptocurrency trading is carried out 24 hours a day, 7 days a week, 365 days a year, unlike stock markets, which operate working hours.
- Regulation: shares are regulated by government agencies, cryptocurrencies are protected by blockchain technology.
- Volatility: Cryptocurrencies are usually more volatile than most stocks.
- Ownership: the shares remain tied to the company, whereas with cryptocurrency you take full responsibility for the asset.
How Digital Currency Works
Digital currencies such as Bitcoin are recorded in a transparent and immutable ledger called the blockchain. Just as a bank keeps a record of your savings on its computers, Bitcoin keeps a record of your investments on the blockchain. However, unlike a bank that may run out of cash reserves, the exact amount of Bitcoin you own is always available to you.
Only 21 million Bitcoins are available, and it is impossible to create more, so it will never lose value due to inflation. Once all of the available Bitcoin is released, its scarcity will ensure that it continues to hold ever higher value. Other cryptocurrencies use similar or equivalent supply control methods to protect against rampant uncontrolled issuance that leads to endless inflation.
Due to the large selection of cryptocurrencies offered, many people are not sure which crypto asset to buy. Generally, the best way to judge a reliable crypto asset is to look at how long it has been running. Bitcoin, Ethereum, and Litecoin have been around for many years and have proven themselves to be reliable investments. Unlike some new cryptocurrencies that may disappear in a year, these coins promise to be a safe and long-term investment.
Key Bitcoin Statistics:
- 11 years of safe operation;
- The offer is limited to 21 million coins;
- Market estimate of $ 1 trillion
- 408.8% average annual return
Who is suitable for Bitcoin?
Bitcoin can make sense if you want to diversify your portfolio a bit. Cryptocurrencies like Bitcoin provide an alternative to more common assets.
“Bitcoin is useful if you want to have assets that are not denominated in dollars or other national currencies,” Stein said. “It’s a way to keep some assets off the dollar.”
Overall, even if you feel Bitcoin is a good fit for your portfolio, Stein believes it probably shouldn’t be the main focus of your investment strategy. It’s mostly about how much risk you have, and whether you’re comfortable losing that amount in your portfolio.
“If you like the numbers and calculations behind Bitcoin, then take into account that it may fall,” he said. “So, what percentage of your portfolio are you willing to lose? I think you limit it to 1 to 5%, depending on your risk tolerance. But imagine what your income will be when it grows.”
Who is suitable for the shares?
For most people, stocks are suitable for the vast majority of any portfolio.
“Stocks can be the main focus of a portfolio for most people,” Stein said. “You can calculate the cost based on the profit, and it will be a more stable investment due to its main characteristics.”
In addition, Stein said it is reasonable to assume that even with some short-term volatility, most companies are likely to exist in the future and therefore provide stability. By investing in a large index fund or exchange-traded fund (ETF) consisting of stocks, there is a high probability that you will do well in the long run.
But don’t forget that David Stein is a staunch supporter of traditional investing – stocks. Speaking of the crypto, he speaks of it as a curiosity, which can diversify the portfolio, no more. But crypto traders think very differently. It is cryptocurrencies that are the main focus of their investment portfolio, and stocks are for diversification.
Why Both Bitcoin and Stocks Are a Good Investment
As you can see, cryptocurrency and traditional stocks offer very different investment opportunities. Both asset classes have their advantages and disadvantages, so it’s always best to diversify your portfolio in a balanced way. Investing a certain percentage of their money in Bitcoin and stocks ensures that the investor does not miss out on a large profit from the cryptocurrency, while maintaining a safe long-term position on the stock.
According to statistics, Bitcoin offers the best returns compared to any asset over the past decade, but the technology is still relatively new and does not require strict regulation. It may take some time for governments to develop effective regulatory policies in the cryptocurrency sector to guarantee traditional investors the security of the asset.
On the other hand, stocks have a long history of profitable and safe investment opportunities. If you do your research, follow emerging trends, and choose good stocks, you can be sure of a decent return on investment (ROI). Companies like Apple, Amazon, and Microsoft have shown excellent long-term investments, although for each of them there was also a promising company that failed.
Diversification is the key to success
Whatever you choose to invest in, always remember that diversification is key to ensuring that your portfolio always remains profitable. No asset or asset class is immune to losses, so don’t put all your eggs in one basket. A good investment portfolio should include a well-balanced mix of stocks, precious metals, and cryptocurrencies.
For this reason, many people prefer to invest in both stocks and cryptocurrency products, which helps protect themselves from any single failure. Investing in a combination of cryptocurrencies and stocks can provide an additional layer of protection, balancing any losses and gains, and ensuring a stable return on investment.