Cryptocurrency vs Traditional Investments: Which should I choose?

Disclaimer: As cryptocurrencies are highly volatile assets, Mining Rig Club is not responsible for any losses incurred. This article is solely for reference and education and do not serve as financial advice.

Should you consider cryptocurrency as an alternative to meet your financial goals? Investment goals highly depends on age, income and outlook. It will also depend on the stages or phases of your life.

Traditional investments include buying property, stocks, bonds, funds and investment plans. Let’s take look at the pros and cons of each type.

Property:

Pros: High return, low risk.

With careful planning, they can reap returns at multiplied costs with little risks, especially if investor purchased insurance.

Cons: High barrier to entry, long waiting time

A large capital is needed to purchase and maintain a property. It includes possibly mortgage, insurance, agent fees and bills. They are more popular among middle aged investors who are looking into family building, as properties reap rewards over time in the form of appreciation over decades, or via monthly rent.

Stocks:

Pros: Medium to high returns, constant revenue

Returns highly depend on the stocks chosen. There’s a low barrier of entry, thus they are popular among investors of all ages. Some stocks offer monthly or quarterly dividends, which can be a steady stream of passive income over time.

Cons: Medium to high risk.

Risk level highly depends on the stock invested, and the type of investor you are. The lower the risk, the lower the return.

Funds

Pros: Medium returns, low risks

Funds include Mutuals, ETFs, REIT etc. The returns are medium with low risks. Thus, investors can be of any age, to accomplish a long-term goal like planning for retirement or to generate a stream of income during retirement years.

Cons: Potential drastic changes, entry barrier.

The past performance of the funds are not an accurate predictor of future returns. It’s unlikely that the fund will remain the same forever, due to possibility of managers changing, funds merging or being sold. There’s a certain entry barrier which subjects the potential buyers to a vetting process.

Investment plans:

Pros: Medium returns, Low barrier of entry, Low risk

Investment plans are likely the most affordable and thus popular among young investors below 30 years old. They guarantee a certain percentage of returns and almost always deliver.

Cons: Long waiting time

Usually, a waiting time between five years to decades is needed to reap the returns. Thus, they are not the  common choice for middle-aged or retiring/retired investors.

Cryptocurrency:

Pros: No Central Issuing Authority, transparency, low barrier of entry, potentially very high returns

Unlike fiat currencies (USD, SGD, etc) most cryptocurrencies are issued via a decentralized network. This network works together to determine a cryptographic calculation to create the coin. This also incentivizes participation in these networks in a process known as mining. The community must work to repair exploits in the cryptocurrency and reinforces the importance of trust in others.

Cryptocurrency is fully transparent in the sense that a community must be built for them to succeed. The primary benefit of a cryptocurrency investment is the limited control of one party and transparency of the system. Many people are unaware of how their deposits are being used by the bank, thus many do not trust banks.

Most coins have a low barrier of entry. Most countries’ current regulatory environment also allow almost anyone to buy, trade and mine cryptocurrencies.

As cryptocurrencies are still new and awareness level is considered low, many have not started trading it, That’s why some coins are currently undervalued. Some have tremendous potential and could possibly yield multiplied returns if bought and sold at the right time.

The most popular cryptocurrencies now. Source: YourStory.

Cons: Regulatory Concerns, High risk

Cryptocurrencies can be easily misused and abused. Thus, in some countries, such as China and Korea, cryptocurrencies are banned. In Singapore for example, the trading of crypto is not regulated by authorities, which also means if one makes a huge loss, they are not able to seek protection under the law.

Cryptocurrencies are highly volatile as they are new types of assets that only appeared in recent years. One is expected to experience huge price fluctuations.

If one chooses to mine coins, they are more protected against volatility. They can possibly have a steady stream of coins coming in on a monthly basis, as well as benefit from high prices if they choose to sell their earned coins. However, the entry barrier to mining is much higher than trading, as one needs to pay for the setup of rigs and hosting fees, which include electricity and maintenance of the rigs.

A typical mining rig set up.

Before diving into cryptocurrency, it is important to understand and study all your options first. Mining Rig Club encourage investors to diversify their portfolio to include both traditional and cryptocurrency to reap the best benefits. We provide complimentary financial consulting to anyone interested in using cryptocurrencies as an investment tool. Join our upcoming free MasterClass where you can learn more!

 

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