If you are a new-age investor, you would undoubtedly have a question- whether to invest in the stock market or bitcoin. Cryptocurrencies like bitcoin, Ethereum, litecoin, etc., have dominated the headlines in recent years as far as investing is concerned. It has attracted people from all walks of life, especially the new-age investors like you. You have taken big risks while investing in cryptocurrencies in search of exponential returns. But the big question is whether you have neglected the tried and tested, long-term inflation-beating returns world of stocks? Well, the returns from bitcoin and other cryptocurrencies defeat the argument. However, given the fact that cryptocurrencies do not have a long history, the regulation aspect, the risk they possess, etc., should also be seen in the context.
Let us evaluate the stock markets and bitcoin on different parameters to assess which is a safer and better option for you.
There is no doubt that bitcoin is far riskier than investing in stock markets or any other asset class for that matter. There is a high degree of volatility in bitcoin and other cryptocurrencies. Since bitcoin does not have any physical asset backing, its value keeps fluctuating. The value of a bitcoin solely depends on the demand and supply of market participants. On the other hand, stock markets are far less volatile. There are a lot of factors that you can analyse in predicting stock prices and a lot of risk-mitigating strategies you can apply when investing in stocks of companies.
Stock markets across the globe are highly regulated. A dedicated regulatory authority oversees the operation on a stock exchange. In contrast, cryptocurrencies like bitcoin are highly unregulated. They are prone to all sorts of cybersecurity risks. It becomes virtually impossible for you to retrieve bitcoins when hacked by a hacker.
The stock market has something for every investor. You can choose to invest in many sectors—technology, metals, banking, etc. You can also select different investment routes like mutual funds, exchange-traded funds, etc. On the other hand, cryptocurrencies do not offer much as far as diversification is concerned. Bitcoin alone constitutes more than half of the crypto market. There are not many other popular contenders. The majority of them are shitcoins or scams.
Long term horizon
In investing, the most crucial aspect is wealth creation. The longer your tenure, the more chances you can create long-term wealth. Stock markets are a time-tested tool to create long-term wealth. But, when it comes to bitcoin or other cryptocurrencies, long-term wealth creation may take a hit because of the volatility of these digital assets. If you are deploying your hard-earned money, you should choose less risky asset classes like bonds, money market instruments, or suitable, quality stocks of blue-chip companies.
As you can see, stock markets are a better option for online investing and long-term wealth creation. They are less volatile and less risky and can create massive wealth if you remain invested for an extended period.