This is a personal preference for investors, but regardless of your choice, always ensure that your portfolio remains diversified to mitigate the risk of losses. We look at three very different types of investments: crypto, stocks and real estate.
Crypto is the more volatile investment as the risk-to-reward rate is higher. It is a new digital currency, and there will be growing pains with any new currency. Investing in crypto needs a more adventurous investor, but it could offer high returns over the medium term. Short-term volatility could see a crypto investment lose 30 or 40% of its value, for example. Crypto investors need to be prepared to lose part of their investment over the short term. Investors tend to be emotional, and not all will be able to ride out the volatility of crypto over the short term.
If this is the case, then these investors might prefer less volatile investments like stocks. Choosing stable top companies offer good returns over the medium to long term. There is still volatility in the short term, and there may be losses, but 5-year averages could see as much as 10% p.a. in returns. Stocks are an excellent way to build wealth over the long term but consult with a financial advisor to ensure you are suitably diversified across various sectors and regions.
Property is a different kind of investment and, for many, is their biggest asset. It is less flexible than stocks and crypto, as you can’t sell a portion of a property to release cash. Whether you only own a primary residential property or invest in several properties, you are highly likely to make a good return as property values tend to increase over time. Buying real estate or property is a medium to long-term investment and could produce a high return or even double in value over 5-10 years. It is important to remember that this investment is not accessible and is an investment commitment for at least 5-10 years. Many choose property as a second or alternative investment method.
It is important to remember that the choice of investment should match investment goals. For some, it means more stocks with a bit of crypto, while for others, it means only stocks and property. It depends on an investor’s risk tolerance, patience and individual needs. A financial advisor will help create a financial plan that suits the individual investor’s needs, help them understand the risks and educate them on their investment choices.
No matter what investments an investor chooses, ensuring their portfolio is diversified to mitigate risk and volatility is vital.