If you are a new investor, one of the first questions you will want answered is what’s best to invest in. Should you go for stocks or cryptocurrencies like Bitcoin? The most important thing to understand and evaluate when you are thinking of making investments is risk. You also need to have clear overall portfolio goals. What do you want to get out of your investments and when? As you are answering these questions and checking out information about both Bitcoin and stocks, you might just find the answer you are looking for. Take a look at some factors and money management tips that may influence your decision.
Bitcoin vs. Stocks – Risk
All investments carry risk. If you invest in stocks, you can just wake up one day and the market could crash for various reasons. The company you’d have invested in could go bankrupt. On the other hand, a stock can increase in value significantly over time. You just have to learn to weigh risk and choose stocks that can be trusted.
Bitcoin on the other hand is speculative, and it is totally based on supply and demand. It is powered by blockchain, an open-source code that powers over 6,000 other cryptocurrencies. As a currency, the value of Bitcoin is based on what people are willing to pay at any given moment. Also, Bitcoin is a smaller market, so unlike bigger currencies, it carries a bigger risk of big swings. It can grow in value dramatically, and it could fall drastically in a very short space of time.
So when you want to invest, consider the risks involved with all your options before you pick a side.
Bitcoin vs. Stocks – History
We cannot use the past to reliably tell the future, but it can give you a general idea of what might happen. It is, therefore, crucial to look at how the two investments have behaved in the past. For instance, in 2015, the price of bitcoin fluctuated between $200 and $500. However, in 2017, the price shot up to $19,891 in December, before dropping down to less than $3,500 a year later. This goes to show how volatile Bitcoin is.
Stocks, on the other hand, haven’t been that dramatic. In fact, they have been quite stable since 2015. Even though you may notice some ups and downs, there’s more long-term historical support. That differs from Bitcoin, which doesn’t have a pattern or clear history. People can just start buying it because they don’t want to miss out.
Who Is a Good Fit for Bitcoin?
Bitcoin makes sense if you’re looking to diversify your portfolio. You can also use it when you want to hold some assets away from the dollar. It, however, shouldn’t be the principal focus of your portfolio. It can go from zero to a hundred in days and vice versa. So, when you invest in bitcoin, think about how much you are willing to lose.
Who Is a Good Fit for Stocks?
For most investors, stocks make up the bulk of their portfolio. They are more stable because of their underlying characteristics. Even if there might be some volatility here and there, companies will always exist and they are not a passing phase or temporary trend. With stocks, there is a good chance that you will still hold your assets in the long run.
Is It Still Worth Investing in Bitcoin?
Bitcoin is not cheap at the moment, but who knows what its price might be tomorrow. If you believe in the idea of Bitcoin, you can consider investing some money into it, but you need to invest carefully. There are a lot of millennials who are buying homes, and some of them invested in Bitcoin. Statistics even show that 37% of all home buyers are millennials, but even if it looks tempting, try to not invest all your money in Bitcoin.
Dangers of Bitcoin?
One of the more obvious dangers of Bitcoin is that you can wake up and it won’t be there. If that happens, there will be no one to call or consult since it’s not central to any company or country. The second danger is volatility. With Bitcoin, you can have a million today and it can all lose value because of rumors. The currency doesn’t have a track record, and few people understand it that much.
These factors create a level of risk that can present a danger to investors. Before you decide which one you want to invest in, do your research, go over some money management tips and make sure that you are making the right choice. By 2023, we will have over 7.7 million more high-net-worth individuals (HNWIs) in the world, and if you make the right decision, you just might be one of them.