If you spend any amount of time at all on the internet these days, then you're probably familiar with both cryptocurrency and meme stocks. Cryptocurrency investing has really taken off in recent months, while meme stocks were all the rage earlier this year, and recently, AMC Entertainment Holdings (NYSE: AMC), a classic meme stock, experienced another wild ride.
If you're hoping to get in on one of these trends, you may be wondering — should you load up on meme stocks in your portfolio? Or should you put some money into cryptocurrency?
What's your appetite for risk?
If you're the type of investor who doesn't tend to shy away from risk, then you may do fairly well with either meme stocks or cryptocurrency. But if you're the risk-averse type, then in the battle of meme stocks versus cryptocurrency, the ultimate winner could be “neither.”
Meme stocks and cryptocurrency are actually pretty similar:
They're both volatile.
They're both pretty speculative.
They're both heavily influenced by what goes on over the internet.
The whole reason stocks like AMC exploded early on in the year is that a group of Reddit users talked them up in the hopes of initiating a short squeeze — an endeavor that proved successful. Meanwhile, cryptocurrency is so sensitive to news that any time a celebrity endorses it or speaks up against it, its value has the potential to rise and fall. It's this volatility that makes both investments a fairly risky endeavor.
Furthermore, it's hard to predict where meme stocks like AMC will be in the future. Movie theaters took a beating during the pandemic and now face more competition than ever thanks to streaming services. As such, it's hard to say how well AMC will fare in the coming years.
Similarly, the future value of cryptocurrency will largely hinge on whether it becomes a widely accepted form of currency. And right now, it's too soon to predict whether that will happen or not.
What's the right choice for you?
If you're looking to cash in on a current investing trend, think about which option aligns better with your knowledge and comfort zone. The good thing about meme stocks is that they work like regular stocks. If you're interested in AMC, for example, you can look at its financials and aim to figure out what gives it an edge over other theater chains.
On the other hand, if you already own a lot of stocks, investing in cryptocurrency could be a good way to diversify your portfolio even further. Cryptocurrency doesn't necessarily rise and fall in value in conjunction with stock market movement, so to some degree, it could help buy you some protection in the face of a stock market crash.
But ultimately, you have to feel good about whichever investment you go with, and you have to fully understand what you're getting into. Meme stocks and cryptocurrency are actually quite similar, so it wouldn't be shocking if you were to decide that you're going to either invest in or stay far away from both.
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Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.