Cryptocurrency, Stock Market or Gold | Where Should You Place Your Bet?

by Evan
laptop with trading screen up

Introduction

When it comes to investing, there are several aspects you should know before deciding where to place your bets. Especially during times of crisis, one should be well aware of the risks, advantages, disadvantages, and projected future growth concerning areas of investment.

Three of the best-known investment choices are cryptocurrency, equities or stocks, and gold. Each of them performs differently and during the Coronavirus period, significant changes took place. Keep reading if you would like to know where to place your bets next. 

Return on investment or ROI

Firstly, you should get familiar with the Return of Investment (ROI) and learn how to calculate it. ROI is a performance measure used to assess the efficiency of an investment or to compare the efficiency of different investments.

ROI tries to directly measure the amount of return on a specific investment, relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or ratio. 

Cryptocurrency: the good, the bad and the ugly

Some of the characteristics of cryptocurrency are anonymity, irreversibility, good security, global speed, and absence of a gatekeeper.

Cryptocurrency is a speculative asset, which means that you buy coins with the hope that someone else will pay more for them, just like gold or silver. All these speculative assets do not bring any income to the investor. Adding to that, cryptocurrency—while it has better tracking now— is still a lightly regulated market. They might make you rich, but you SHOULD NOT place all your bets on it if you want to save for retirement or pay your living expenses right now.

Risks of investing in cryptocurrency

Business solvency: The digital coins’ value is not backed by any central authority, thus their value is only determined by the value that users place on them through their transactions. This means it is predisposed to downfalls in trading activities and abrupt drops in values. You are investing in a Wild Wild West environment!

Cyber-fraud risk: As transactions are conducted solely on the internet, any participant in the market may fall victim to hackers who can break into crypto exchanges, drain crypto wallets, and infect computers with malware that steals cryptocurrency. To protect yourself, you should rely on the strength of your computer and the different security systems provided by third parties. Keep in mind that once lost, your digital coins are never to be recovered. Avoid suspicious deals or promotions as well!

Predictions 

However, if you’re determined to invest in cryptocurrency, there is a lot to look forward to.

Here is the good news: according to InvestingHaven‘s research team, even after the historic COVID-19 crash, which had a short-term disastrous effect, we might see Crypto prices rising in 2020, and rise even more in 2021. What they believe is that the crypto bull market is still intact. Here are some other predictions that you should take into account, according to the research:

  • In 2020, Bitcoin will remain the leading indicator for the crypto market;
  • ‘Risk on’ markets will be more supportive of the crypto bull market in 2020, thus decreasing the risk of crashes in the future;
  • In 2020, there will be a modest acceleration concerning the institutional capital pouring into Crypto Investments; and
  • This year, there will be increasing integration between the ‘real world’ and the crypto world.

Good old gold 

Gold is another speculative, unproductive asset that does not pay any interest or produce any goods or services. However, gold has a unique, palpable consistency that might give many people a sense of security. Gold’s buying power has largely remained the same regardless of the value of its price, which is why it is known rather as a “store of value, than as an investment.

The best way to invest in gold is for the short-term, in uncertain periods, or when the stock market is struggling. You should proceed by investing in an ETF like GLD with a professional broker, to make sure you pay for its real value. However, bear in mind, market timing is unpredictable. Even if one-day gold is outperforming the stock market that doesn’t mean it won’t be under-performing the next day.

Once again, gold can be a great investment if done right but don’t forget to view it mainly as a store of value (an interesting on this topic is here: https://www.sovereignman.com/lifestyle-design/four-alternative-stores-of-value-8966/) and make sure you don’t have all your bets placed on it. Otherwise, you might be missing out on the opportunities provided by the stock market which will give you better returns for a lot longer. 

Predictions

According to the research on gold prices, gold is entering a new “bull market” that might continue for multiple years. They predict several spikes in the 2020 and 2021 and mention that we will have to wait a year or two before a definite breakout above gold’s former highs at $2,000. This prediction, however, does not assume unexpected, exceptional circumstances like sudden but wild inflation. Here are their exact predictions:

  • In 2020, it is predicted a mildly, bullish spike at $1,750 for gold’s price. This forecast will be invalid in case gold falls back to its breakout level at $1,375.
  • In 2021, it is predicted a wildly, bullish spike at $1,925 for gold’s price. This forecast will be invalid in case gold falls back to its breakout level at $1,375.

The stock market

Investing in stocks is one of the most popular and prudent investment choices one could make. Even if it is an extremely volatile market, it still brings about immense opportunity to grow your fortune.

By purchasing shares of a public company, an investor will have multiple benefits: firstly, if the value of the company they are buying grows over time, they may be able to sell their shares later on for a good profit; secondly, any profits the company makes over time and are not reinvested will end up in the pockets of the shareholders one way or the other. Once the stock you bought starts to make you money, you can use the profit to buy even more stocks and so on. 

If you are a beginner in the realm of the stock market, start by learning the basics of investment. Then, do your research for a company you resonate with personally and investigate the company’s mission, management, goals, fundamentals, to make sure it’s worth it long term. The last step is to actually purchase the share(s). The best way to do it is through an online broker. Even though the online system is more ‘self-serve’, their fees are much lower than a traditional broker. 

Predictions

Taking into consideration the uncertainty of our times, it is not surprising that the financial markets experience a similar unpredictability. During the pandemic, several businesses were doomed, and as we cannot predict how the virus will further affect us, stock market analysis is up in the air. 

The good news, however, is that at the beginning of August, the stock market started to prosper.Many companies recovered and the market outlook in terms of the value and performance has a high capacity for investors compared to the last three months. According to Teletrade, the best value stocks at the moment with the lowest 12 months P/E ration are NRC Energy Inc. and MGM Resorts. 

Other companies that prospered despite the COVID 19 pandemic are consumer-staples sector companies like Walmart, Monster Beverage and McCormick. These companies are also expected to continue growing. Zoom is another great stock to watch as more people work from home.

Another industry on high demand is the biotechnology industry since there is an increasing number of new diseases every year and multiple companies are heavily involved with battling Coronavirus and finding the best way to defeat it. Regeneron Pharmaceuticals, Illumina and Vertex Pharmaceuticals Incorporated are expected promising stocks in the biotechnology industry. 

Conclusions

Whether you invest in Cryptocurrency, Gold, or the Stock Market, make sure you don’t place all your eggs in one basket! Since the prices are on the rise, cryptocurrency might be a great idea if you are ready to take some risks.

Gold is also becoming a bull market, so if you are looking for a more stable, risk-averse, short-term investment, or if you are planning to store your money safely, investing in gold can bring about great benefits.

Concerning stock markets, it is highly recommended to start or grow your investments by purchasing shares of public companies. Even though they are volatile and vulnerable to a crisis such as COVID 19, there are always certain companies that manage to prosper. 

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