Thanks to the internet, more people are becoming financially-savvy. This doesn’t mean that people are getting rich by the thousands, but the fact that people now know that the best way to grow money is to invest it is a huge improvement on its own. Simply storing your money in a savings account is no longer a viable option, since inflation rates simply nullify any profit that you might have otherwise earned.
However, investing is not a guarantee that you’ll be growing your hard-earned money. There are many people who lose most or all of their money in a bad investment. This makes investing especially intimidating for beginners. Between stock trading and crypto trading, which option should beginners invest in?
Risk Tolerance
Both stock trading and crypto trading have inherent risks involved. Both options are very volatile. All it takes is for a modest dose of bad news for a company’s stock price to drop overnight. Cryptocurrency is even more volatile, but the reward margins can be higher.
Beginners have to understand the risks involved with both these trading options. It’s not as much about the inherent risks for each investment option. but rather, the risks associated with each individual stock or coin.
This is really a matter of conducting your due diligence on a particular stock or coin in order to minimize the risks associated with them. Alternatively, you can make use of tools to help you determine the risk factors of particular assets. It’s encouraged that beginners make use of one of the best stock screeners available to help them assess the stocks they want to invest in.
Time Frame
While both crypto and stock trading have the potential to generate a lot of profit for you, they both differ in their viability depending on investment time frames. If you’re looking for a long-term investment, stocks are easily the better option. Even when major indexes like the S&P 500 have delivered negative returns in some years, they deliver higher returns for those who’ve traded stocks for several decades.
Since cryptocurrency is relatively new, it’s still difficult to gauge its long-term sustainability. Despite this, the potential reward margin still presents a very attractive prospect for novice traders. Just don’t expect crypto-related profits to fund your retirement, as the blockchain system can easily crash if governments all decided to outlaw the use of cryptocurrency; which is unlikely, at least for El Salvador, which will adopt Bitcoin as legal tender on September 7, 2021.
The Best Option for Beginners
Neither investment option is inherently better than the other. Novice traders have to perceive these investment options as tools. You have to determine what you need before you can determine which tool would suit you better.
You have to determine whether you want to focus on near-term trades (for which cryptocurrencies are optimal for) or long-term trades (for which stock trading is optimal for). However, if you really want to play it safe as you learn the proper way to trade, you’d be much better off by diversifying your assets. Invest in both, and try to learn both trading platforms to determine which one you’d like to specialize in later on.
Novice traders should also take note that stocks and crypto aren’t the only investments you can make. There are plenty of investment alternatives that can help you grow your money. The general rule in trading is to do your due diligence, minimize risk, and learn from your mistakes. Keep in mind that you have to learn before you earn.
