A lot of people have been putting money into the stock market for a long time. Cryptocurrency, on the other hand, is a newer phenomenon.
Although cryptocurrency has actually been around for many years, it's more recently that investors have been clamoring for it. And if you're eager to grow your money in to a larger sum, you may be thinking of doing the same.
But is cryptocurrency the right investment for you? Or are you better off putting your money into stocks? Answer these questions to find out.
1. What's your risk tolerance like?
Investing in stocks isn't exactly for the faint of heart. The stock market can be very volatile, and sometimes, all it takes is a modest dose of bad news for a company's stock price to plummet.
Political turbulence and general economic upheaval can also move the broader market so that larger indexes, like the S&P 500, lose value overnight. If you buy stocks, that's a risk you'll need to accept.
That said, as volatile as the stock market is, cryptocurrency can be even more volatile. But on the flip side of that, there may be more potential for reward.
The danger of cryptocurrency is that because it's relatively new, it's hard to know how much staying power it has. The future value of cryptocurrency will hinge largely on whether it becomes a widely accepted form of payment. If that doesn't happen, your digital coins could, in the long run, become worth absolutely nothing.
Granted, the same thing could technically happen when you buy stocks. But remember, some of the companies that trade today have been around for well over 100 years. If you do your research and choose a nice, diverse mix of stocks (or buy index funds that lend to instant diversification in your portfolio), then you'll minimize that risk to some degree.
2. What's your investing horizon?
Stocks have long been viewed as a solid long-term investment. Even though major indexes like the S&P 500 have had their share of years when they've delivered a negative return, all told, investors who have stuck with stocks for many decades have come out ahead financially.
Because cryptocurrency is newer, it may not be the most viable long-term investment. If you're interested in it as a short-term investment, great. But you shouldn't buy cryptocurrency in your 30s in the hopes that it alone will fund your retirement.
You don't have to choose
There's no rule stating that you have to put your money into cryptocurrency or stocks. Rather, you can invest in both at the same time. But you may want to invest in each one for different purposes.
Stocks are a great bet for growing retirement wealth. Cryptocurrency, on the other hand, may be the sort of thing you buy in the hopes of turning a near-term profit you can use to take a vacation or meet another shorter-term goal.
No matter which option you choose, it's important to do your research before diving in. Don't just pick stocks without digging into their financials, and don't choose one digital coin over another because it's in the news more. Rather, spend some time assessing your choices so you can go in with more confidence.
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