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Since the emergence of Bitcoin the world has become aware of the crypto universe and the advantages offered by it. The rapid appreciation of cryptocurrencies and the high rate of return, made many investors enter the market, even without having much knowledge.
Many investors have come to question the stocks in their investment portfolios, but the first point is to understand that there are numerous differences between stocks and cryptocurrencies.
The most important thing is to understand what you are buying.
Should I invest in Cryptocurrencies or Stocks?
To invest, you need to know exactly what you are investing in, understand the risks and rewards, and what drives your investment, whether positively or negatively. When the investor does not have the necessary knowledge to carry out a careful analysis, the investment becomes a game of chance.
The shares are a fractional shareholding of a certain company. As a legal ownership interest in the business, shares give its shareholders rights to the assets and cash flow of the business.
The stock price is directly linked to a company’s ability to perform well over the long term.
Cryptocurrencies are not backed by physical assets, but are capable of performing certain functions, such as performing cash transactions, intelligent contracts, which can be executed automatically after specific conditions are met.
As they do not have physical assets or cash flow, cryptocurrencies are driven by speculation. For the investment to be profitable, someone needs to buy it for more than the amount initially paid.
Cryptocurrencies X Stocks: Risks and Security
To carry out any investment, it is necessary to analyze the risks and security. It is always good to remember that every investment has, no matter how small, some risk, even the most traditional ones.
The starting point is to question your tolerance to risk, how you react to losses and gains, understand your profile as an investor.
Another point to be considered is your time, that is, when you will need the money for your investment. The shorter the schedule, the safer your investment needs to be.
The more volatile the invested asset is, the longer its schedule should be, since a withdrawal at the wrong time can generate more losses than gains.
We have set aside a few points regarding the stocks and cryptocurrencies to be considered before making your investment.
- Its performance is related to the success of the underlying company.
- Volatility is high in stocks, they can rise and fall at the same speed.
- The stock market has a solid track record.
- Stocks allow investors to leave their money alone, usually the longer it is invested the better.
- The performance of cryptocurrencies is related to speculation and sentiment. If investors decide never to buy a particular cryptocurrency, its value could go to zero.
- Volatility is high in this market and can increase or decrease by 50% or more in an average year.
- Countries can ban cryptocurrencies at any time on their territory.
- Encryption is best suited for investors who can keep their money stranded, awaiting a spike that could take weeks or years.
Understand that in the investment sphere, it is not necessary to choose between shares and cryptocurrencies, or even other types of assets. Forming a good investment portfolio can be an excellent option, keeping in mind your risk tolerance and time horizon.