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Funds vs. Cryptocurrency — a case for both?

It’s without a doubt that cryptocurrency is trending right now — the decentralised digital money, which works based on blockchain technology, has seen prices skyrocket in the past six months. Coins like Bitcoin and Ethereum have seen incredible returns over the past few months and even Elon Musk’s Dogecoin has got people excited about the possibilities of this digital currency.

However, it’s important to remember that cryptocurrency is an incredibly risky investment and is unlikely to make a lot of money overnight as people might think. Since countries like China and Nigeria banned cryptocurrency platforms and transactions, we have literally seen the value of the whole crypto market drop overnight. Another cause of cryptocurrency’s dip in value was Tesla recently stating that it will no longer accept bitcoin over “environmental concerns.” The electric car company, which takes pride in being a green transportation solution, was talking about proof-of-work electricity consumption. This is despite Elon Musk being a big advocate of cryptocurrencies.

It is likely that the market will recover but this level of volatility makes crypto a high-risk investment that could potentially do you more harm than good.

In comparison, traditional investment products such as stocks, bonds and gold may be considered safer investments and are likely to give you better returns in the long term if you invest in solid companies or assets with underlying fundamentals. One of the best ways to make your money work for you in the stock market is to invest in a fund which is a collection of different investments. The BlackRock MyMap portfolios we offer at Wealth8 are made up of ETFs and index funds to provide easy access to a collection of investments that include stocks, bonds, alternatives and cash.

Even though cryptocurrencies are highly speculative right now, it’s likely that it could become a mainstream form of currency soon. It’s already begun to disrupt the banking and finance industries and with news of governments potentially adopting their own forms of cryptocurrency, the possibilities are endless. Nobody knows what the future holds so it’s essential to mitigate any potential risk by diversifying your investment portfolio across crypto and funds with other asset classes like stocks and bonds.

Whatever you’re investing in, it’s also important to remember that your capital is always at risk. Even a lot of high-growth stocks have had fluctuating periods of growth so as long as you have a long-term strategy in place, a positive investing mindset and belief in what you’re investing in, your investments will grow and pay off for you in the long-term.

When investing, the value of your investment may rise or fall and there are no guarantees you will get back all the capital you have invested.

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