What are your investment options? If you’re like most people, stocks and bonds are the most likely places you’ll put your money. These are historically good options where many people have grown their money over time. Today though, there is another option that is growing in popularity with investors, cryptocurrency markets. Which one is best for you? Here we’ll take a look at the pros and cons of each of these three types of investments to help you decide which one (or ones) is the best investment vehicle for you. 

Stocks

Stocks are ownership shares issued by a company and bought and sold, either privately or publicly. Public trading of stocks happens on stock exchanges and is usually one of the biggest pieces of most people’s investment portfolios. Here are the pros and cons of investing in stocks. 

Pros

Stocks historically have provided one of the highest rates of long-term returns of any financial asset class. This means that, over time, stocks will most likely go up for you. To help ensure this, you have to pick the right mix of stocks, but doing so has generally yielded a good return for investors over the years.

 

Stocks are also highly liquid which means once you invest in them, it is quick and easy to sell them off when you want to turn them back into cash. There are also thousands of companies around the world that issue stock that is traded every day, so it is easy to diversify your stock portfolio. You never have to put too much of your investment into one basket, which will mitigate your risk to some degree if one company’s stock tanks. 

Cons

On the other hand, if the whole stock market tanks, you can lose a lot or even all your investment. The stock market can be fairly volatile and when things happen outside of your control, you can see big losses when you invest your money here.

 

In addition, it takes a lot of knowledge and research to invest in stocks on your own. Even if you do use a financial advisor to invest for you, there should still be a base level of research that you do to make sure you understand how your money is being invested and the potential ramifications of those investments. 

Bonds

A bond is an issuance of debt where the issuer agrees to pay the holder back with interest. Bonds have been popular investments for a very long time and are most commonly issued by governmental or corporate entities. Here are the pros and cons of investing in bonds. 

Pros

For investors that are risk-averse but still want to see their money grow, bonds may be the best investment tool. Bonds are generally very stable and predictable. Even when bond prices fluctuate, these changes are far less than the ones you see in the stock market. 

While it’s always possible that an issuing company could go under or a government collapse (in which case you’ll have bigger problems than losing your bonds), bonds are basically a guaranteed source of income through their interest payments. And, even though many bonds take a long time to mature, some bonds, such as Treasury Bonds, are fairly liquid. 

Cons

On the con side, you are not going to get rich investing in bonds in the short or long-term. The long-term returns on bonds are much lower overall than other investments. Also, interest rate fluctuations severely affect bond prices. As interest rates rise, bond prices fall, which is something to keep an eye on.

One more thing to look out for in the future with bonds is that they have steadily climbed in value since the 1980s. With a 40-year bull market, we may be approaching a time where capital appreciation may have less room to grow. For these reasons, investment experts will suggest that most investors with a diversified portfolio invest less in bonds than stocks.

Cryptocurrencies

Cryptocurrencies, the blockchain-based, decentralized, digital currency started with Bitcoin in 2009 and has exploded into a market with over 5,000 different cryptocurrencies you can invest in. Here are the pros and cons of investing in cryptocurrency. 

Pros

The pros of investing in cryptocurrency can be compared to the pros of the stock market but on steroids. There is good liquidity in this market, the timeframe of gains can be sped up in many cases when compared to the stock market, and with over 5,000 cryptocurrencies currently available to invest in, you can easily diversify your crypto portfolio.

According to Cove Markets, the crypto market has considerable volatility. Volatility does mean the potential for big losses but it can lead to huge, fast gains as well. The fact is that investing in cryptocurrency can turn you into a millionaire in a relatively short period of time. For people who love to gamble and who feel the stock market isn’t a wild enough ride, the cryptocurrency market could be right for you.

Cons

And precisely because of that volatility–enabling fast gains–the crypto market also has the potential to inflict huge losses. You can lose your whole investment here in an instant. Moreover, to start getting into cryptocurrency trading, you need even more technological and financial knowledge than you do with the stock market. And what makes cryptocurrency investing even more challenging than investing in stocks is that there is not currently a broker on every corner you can hire to help you out.

This is a whole new market. There is no real long-term data on what investing in the crypto market will do for investors. In fact, there is no long-term data about anything in the market including whether it will survive longer than a decade. While that can make some investors nervous, there is also no long-term data that says cryptocurrency investing is NOT the next big thing, so many investors are willing to take the risk.

Conclusion 

There is no overarching right or wrong answer as to where you should invest your money. Stocks, bonds, and cryptocurrency all have their own pros and their cons. Which ones are right for you all depends on how you feel about the pluses and minuses of each. Hopefully, now that you know more about each you can make a more informed decision.

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