If you’re not investing your money, you’re missing out on one of the best ways to build wealth and save for retirement.
There are several investment opportunities out there for the ambitious investor, but it’s important to understand each one before making a commitment.
Let’s compare two financial opportunities: cryptocurrency and real estate.
Investing in Cryptocurrencies
Let’s start by outlining what cryptocurrencies are. Cryptocurrencies are digital currencies that are intended to be used to purchase goods and services.
Some people, however, also invest in them in order to make a profit by trading them back and forth.
While there are hundreds of cryptocurrencies, the most well-known one is Bitcoin, which was created in 2009 by Satoshi Nakamoto, a pseudonym for the person or group behind it.
Bitcoin is produced by “mining”, which involves solving complex mathematical problems. A computer is rewarded with Bitcoin if it manages to do so.
Crypto is different from traditional currency as it is decentralized and no one entity controls it.
With Bitcoin, payments are made through a chain of computers that all share the same ledger. Each time there’s a transfer, it gets added to the blockchain.
The underlying protocol and the limited number of crypto coins make cryptocurrency inflation-proof and highly demanded.
Pros of investing in Cryptocurrencies
The benefit of investing in cryptocurrency is that they have a low barrier to entry. That means that it’s easy to start with just a little bit of money.
While the price of a full Bitcoin is fluctuating around $30,000 to $40,000 USD (at the time I am writing this article), an individual can purchase much smaller units.
There are so many altcoins that will allow you to purchase a full coin for much, much lower prices. One of the most popular being Ethereum, which is currently going for around $2,300 USD.
Investing in crypto might sound risky, but the potential for big returns over time is there.
The price of Bitcoin has risen by 5,000% in the past five years. It was closer to 10,000% during its peak in Mid 2021. Other coins have posted over 1,000% returns in the past few years.
Many early adopters of cryptocurrency are reaping massive returns. And more institutional investors are warming to the idea of cryptocurrency investment.
Some project that Bitcoin’s price will grow to over $100,000 in the near future and may eventually replace fiat money.
The risks of cryptocurrency as an investment
Although many investors like cryptocurrencies because they’re digital and decentralized, the lack of tangibility may be a drawback.
Bitcoin is intangible—it exists only as a set of numbers on the internet. That can make it vulnerable to hacking, fraud, and other kinds of online crime.
The difficulty of ascertaining the true value of a cryptocurrency makes it hard to compare it to real estate, or any other kind of investment, which has far more transparency in terms of price.
Some people think that because of the recent fall in crypto prices, it’s a bubble that will all burst and they’ll end up with nothing.
There are no dividends from crypto, so from a cash flow perspective, it is very different from real estate.
The only way to make money with crypto in the long term is via capital appreciation.
The downside to crypto is that it’s volatile. Because of this, you can’t be entirely sure what the current value of any given cryptocurrency is.
The volatility of cryptocurrency makes it difficult to function as a currency, which is the main reason why most people consider it a speculative investment.
If the use of cryptocurrency becomes more mainstream, governments are likely to also implement stricter rules for its trading.
There is no guarantee the IRS will ever be able to regulate the transfer of cryptocurrency. It is, however, very likely that governments will be able to regulate it eventually – look at what happened in China around 2017 when they outlawed crypto trading.
Investing In Real Estate
Real estate is an investment that has stood the test of time and can help you save for retirement and build wealth.
One of the major advantages of investing your money in Real Estate is that it’s a tangible asset.
It has intrinsic value because of what it is, not because people attribute a value to it. It’s also a necessity, as people will always need a place to live and a place to work.
Real estate provides investors with the opportunity to force appreciation of their assets.
Your investment in the real estate market can help you increase your equity and eventually force appreciation. You can make strategic improvements that can result in higher monthly rents and increase the value of the property.
What types of Real Estate should you invest in?
The best types of real estate investment is rental real estate that produces an income.
Compared to other types of investments, vacation rentals are very appealing.
For instance, you don’t need to actively manage the property and deal with tenants and repairs, and so forth. You have a vacation home you can holiday and enjoy time away in another location.
One of the most outstanding benefits of being a real estate investor is the tax breaks and deductions that you’ll receive when owning real estate, which can make it more profitable than other forms of investment.
So, Should You Buy Cryptocurrency Or Real Estate?
Although it’s tough to make predictions, investors seem to be betting on both real estate and crypto as the industries of the future.
Both assets have a time and a place. There are a lot of benefits to choosing real estate, including the ability to generate more monthly income, tax incentives, and more. With crypto, prices can fluctuate wildly, so it’s more risk but a very good reward too.
That’s why the best approach is to do both. Use Real Estate such as vacation rentals to generate a steady income and to use cryptocurrencies as a way to build wealth through strategic investing.
That’s why many of the rich get richer and others don’t seem to make the gains.
It’s all about diversifying your investment portfolio and securing it for the future while having income coming in so you can invest in cryptocurrencies.
Know that you have another secure investment in real estate that allows you a cushion of stability and a diving board for more future rewards.