- Cryptocurrency has gained popularity among investors.
- There are different benefits you might reap by owning digital coins.
Here's why you may want to dive into digital currencies.
Many people are used to investing in assets like stocks and bonds, which have been around for centuries. Cryptocurrency is a much newer investment, and as such, it falls outside a lot of people's comfort zones.
That's understandable. Not only is crypto fairly new, but it's also extremely risky. The cryptocurrency market tends to be even more volatile than the stock market, and it's still unclear as to whether digital coins have the same long-term staying power as stocks.
That said, there's plenty to potentially be gained by owning cryptocurrency, provided you understand the risks involved. Here are three ways you might benefit by investing in it.
1. Crypto can make you wealthy
You might buy shares of a given stock at $50 apiece, only to have them grow to be worth $100 apiece down the line. The same concept applies to cryptocurrency. The value of digital coins can fluctuate over time, and you might end up in a position where you can sell your currencies at a much higher price than what you paid for them. Of course, the opposite is also true.
2. It can lend to diversity in your portfolio
There's a reason investors are constantly encouraged to diversify their portfolios. A diverse mix of assets could protect you from losses in the event of market downturns, paving the way to grow wealth over time as different markets flourish.
If your current portfolio is limited to stocks, adding cryptocurrency to your personal mix could end up being a solid move. Imagine the stock market crashes and it takes months for your investments to regain their values. If, at the same time, your cryptocurrency investments are holding steady (which could happen since they're a separate asset class), you won't be looking at such extreme losses -- even if they're only losses on screen, as opposed to the actual losses you'd incur by selling off investments for less than what you paid for them.
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3. It can be treated as bonus cash
Some people buy cryptocurrency with the thought they might lose all of their money. As such, when their investments do well, they get to run with their profit and use it as they please.
If you're not super confident in cryptocurrency but have some spare cash and are willing to dabble in it, you could take a similarly laid-back approach.
Say you're given $100 as a birthday gift and you decide to put it into crypto. You may go in assuming you might lose that $100 within a week. But what if the value of your investment jumps to $150? At that point, you can cash out and treat your profit as bonus money to enjoy (though keep in mind selling cryptocurrency at a higher price than what you paid for it means having to pay taxes on your gains).
Although cryptocurrency clearly isn't for everyone, if it's something you're interested in owning, it pays to do some research and give it a try. You may find it serves you well in a lot of different ways.
The Motley Fool owns and recommends Bitcoin.
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