Cryptocurrency and mutual funds are two popular trading assets. Like any other asset, both mutual funds and cryptocurrency have their distinct procedure for investment. Before we head on to find which investment option is best, let us gain a precise understanding of both types of investments.
What is Bitcoin?
Bitcoin was the very first cryptocurrency ever created. It was introduced to the trading world in the year 2009 by Satoshi Nakamoto. Bitcoin is a decentralized digital currency. It is independent of any regulations or control from government authority. Today, a huge market revolves around Bitcoin. The popularity of this digital currency has grown by manifolds. Due to high market volatility and price fluctuation Bitcoin assures its investors a good return.
What are Mutual funds?
Mutual funds are a collaborative investment where several investors pool in their capital to invest in other financial assets like bonds, stocks, company shares, debt instruments, etc. The mutual fund investments are managed and executed by fund managers. They are the concerned people who decide where to invest capital for maximum returns. Mutual funds are governed by some regulations and the returns earned on them are subject to taxation.
Bitcoin VS. Mutual Funds : Understanding the Risks Involved
Bitcoin
1. The cryptocurrency market is very unstable. It can either make you an overnight millionaire or destroy everything at once. For an instance, consider Ethereum, in the start of 2017, it was priced around $40, which later increased to $400 and now it is being traded at $200.
2. Currently, the Blockchain is in its initial phase. However, it has the potential for mass adoption. Institutional adoption for Bitcoin has been already trending. Moreover, few countries have already taken steps to legalize cryptocurrency. All these events work to enhance Bitcoin’s market value and assure them a good return on investment.
3. Bitcoin investment is all dependent on time and risk assessment you can put in. There are speculations that Bitcoin value will witness a huge appreciation in near future. Its prices can go as high as $100,000.
Mutual Funds
1. Mutual funds are influenced by market conditions. Therefore, before investing in mutual funds, make sure to study the sector you are going to invest in. For good returns thorough market analysis is very critical. Generally, in 3-5 years, mutual funds investments can offer you a 30% return.
2. Mutual funds are also subject to market risk; however, as compared to Bitcoin it is relatively low. Since mutual funds are under regulations of governing authority, you can get to know mutual funds NAV (Net Asset Value) on daily basis. This provides you a clear picture of whether you should invest or withdraw money from mutual funds.
3. Investments in mutual funds up to INR 1.5 lakhs are exempted from tax. On the other hand, there is no such provision for bitcoin investment.
Bitcoin or Mutual Funds: Which to Invest in?
Both Bitcoin and Mutual funds have different techniques and performance. There are like two poles apart. So, it’s total up to you and your risk appetite which asset you want to invest in.