Cryptocurrency vs Mutual Funds: What is better to Invest?
Everything in the world, whether man-made or natural, has its value and keeps fluctuating constantly. The concept of money was first used thousands of years ago as something to trade for. Only in 600 B.C, the concept of currency in the form of coins and paper was invested. The concept of money or currency has evolved into a much complex system since then. This interests people to invest in things whose value tends to go up over time to grow their money. Over time, different ways of investments have been developed and are still constantly on their way to invention.
This blog specifically revolves around two types of investments, namely – Mutual funds and cryptocurrency which is the most talked-about investment vehicle.
What is a mutual fund? And how does it work?
Most of us know about mutual funds or have at least heard of them. Well, a mutual fund is a financial vehicle that consists of a pool of money from various investors which goes in securities like stocks, bonds, money market & nowadays in real estate as well.
Mutual funds are managed by professional fund managers whose aim is to make capital out of investments made by people. Any gain or loss is proportionally shared by each shareholder of the mutual fund.
What is cryptocurrency? And how does it work?
“Crypto has a chance of becoming Digital Gold,” says Former US Treasury Secretary. Cryptocurrency or crypto is a digital currency used in peer-to-peer electronic cash systems over the internet. Cryptocurrencies are decentralized i.e. there is no centralized authority to govern them, and they work based on a blockchain system.
Bitcoin is one of the most famous types of crypto. Bitcoin along with many others is limited in number unlike other types of currencies which can be increased if needed. Cryptocurrency is discovered or mined by solving complex mathematical problems. Some other famous cryptocurrencies are – Ethereum, Litecoin, Bitcoin Cash, etc.
The question arises – which of them is better for investment?
|Source||The existing assets and their values.||Most cryptocurrencies are finite in number and are yet to be mined completely.|
|Risk||Comparatively low risk||High risk due to uncertainty and volatility.|
|Returns||5% – 15 % annually||Fluctuates annually from 1318% in 2017 to -72.6% in 2018 to 87.2% in 2019 to 302% in 2020|
|Additional costs||Very Low Transactional Fees||Very low transactional fees|
|Medium of investment||Through financial advisors or online platforms.||Online through any crypto trading application or crypto exchanges,|
|Quantity||The potential is not finite and is measured by the value of assets.||Most cryptocurrencies are finite in number and are yet to be mined completely.|
|Legalities||It is legal and regulated by SEBI in India.||Using crypto is legal but it is not recognized by any Central government across the globe.|
So then, who wins?
Well…the answer is no one. Both of them are not always compatible as an investment option. Where should one invest depends on various factors but the most important one is “Risk appetite”. As mentioned in the above table, both of them have differing returns and thus way different risks associated with them.
Apart from its uncertainty, crypto faces one major issue that is – since it’s decentralized it is very difficult for it to become a form of currency. On the other hand, big corporates like Apple and Amazon are in favor of crypto as a currency, and that is why it has now become a tricky issue and constantly appears in financial news.
Now few more data for your understanding. Only 100 people across the globe are holding 13% of BITCOIN with their individual capacity. 40% holding of all BITCOIN globally holding by 2500 unknown accounts. That is how single trade by 1 account holder influence and generate very high of volatility.
We believe looking into the all parameters we have to choose sensible and realistic products and services which suit our risk profile.
No matter where and how you choose to invest, it is quite understood that planning is the key. It is highly recommended that you consult a financial distributor for your hard-earned money to safely grow for your future needs.
Imperial Money Private Limited is one such firm that provides personalized financial services and wealth creation activities. This organization is an expert in mutual fund distribution and systematic investment products. Imperial money aims at sensible investment and customer satisfaction.
In conclusion with this analysis, there are always different ways to invest and grow your money. People need to choose the right option for them keeping in mind their capacity and ability to cope up with the outcome.https://www.imperialfin.com/blog/cryptocurrency-vs-mutual-funds/