Bitcoin is not a new concept, but it is gaining renewed interest from investors.
In the past year, the Bitcoin price has increased by up to 350% and is currently 275% higher. However, it is also an extremely volatile commodity, and its price has seen dramatic ups and downs in the past few weeks.
It is tempting to try and capitalize on the bitcoin hype, but it can be a risky move. While some investors are optimistic about the future of cryptocurrency, others say a bubble will occur and it is only a matter of time before the bubble bursts. If you buy and sell at the right moment, you can make serious money. But most likely, you could get burned and potentially lose a significant amount of money.
Instead of investing your hard-earned cash in Bitcoin, opt for one of these safer yet rewarding investment options.
1. Index funds
Index funds are large collections of stocks of stocks that track a specific stock market index, such as: Dow Jones industry average or the S&P 500. They may not be as exciting as high-flying investments like Bitcoin, but they are one of the more stable and reliable investment options.
Because index funds track the market, you are almost guaranteed to make positive returns over time. Of course, nothing is really guaranteed in the world of investing. In the past, the S&P 500 has achieved an average return of around 10% per year since its inception. And if the market itself does well, your index funds will do well too.
The disadvantage of index funds is that they are just average. They follow the market, which means they can’t outperform the market. For some investors, this is a deal breaker. While they may not see extravagant short-term gains, they make up for it with their consistent long-term stability and growth.
Exchange Traded Funds (ETFs) are similar to index funds in that they are collections of stocks that are bundled into a single investment. The biggest difference is that ETFs, like stocks, can be traded all day.
ETFs are also more flexible than index funds. Because index funds mirror the indices they track, you cannot choose which stocks are in the fund. While you may not necessarily be able to choose the stocks contained in an ETF, there is a larger selection of ETFs that cover different industries or industry segments.
For example, you can invest in a broad index ETF that is very similar to an index fund. Or you can invest in a niche ETF that follows a specific industry, such as the healthcare industry or the tech industry. For example, if you are investing in a technology ETF, all of the stocks in the fund are technology stocks. This allows you to limit your risk by diversifying your investments while focusing on a sector or segment that interests you.
If you’d prefer to invest in individual stocks rather than funds, fractional stocks allow you to invest in specific stocks without breaking the bank.
Fractions are small parts of a single stock. Buying fractional stocks enables you to invest in companies that may have high stock prices per share and are only spending a few dollars. Of course, you won’t see as much return as if you bought full stocks (even though your fractional share will change in value by the same percentage), but you won’t be risking as much money either.
Not all companies allow fractional shares and not all trading platforms allow fractional shares to be traded. So keep that in mind when deciding which investment strategy is right for you. However, if you’re keen to invest in a particular stock without spending an arm and a leg, fractional stocks can be a smart option.
Bitcoin may be in the headlines, but that doesn’t necessarily mean it’s a wise investment. Instead of putting all of your money into a single risky investment, diversify your portfolio and invest in stocks that are more likely to perform well over the long term. Focusing for the long term can help you avoid getting involved in potentially risky investments.