Stocks and cryptocurrencies do have some common features as both assets are traded on specialized exchanges and can generate profit due to the exchange rate difference. However, their similarities largely end there.
Shares represent a stake in a real business. When you buy company shares, you become a co-owner of a business that produces goods or provides services. Stocks usually pay dividends, have a long history and are regulated by the state. This makes them more predictable and reliable investment instruments.
Cryptocurrencies are a fundamentally new class of assets based on blockchain technology. Their value is not tied to real assets or business, but is driven solely by supply and demand. Cryptocurrencies are marked by high volatility, so their exchange rate can either soar by hundreds of percent or crash over a brief span.
Shares are more suitable for conservative investors who are looking for stability and a long-term investment. This is a good choice for those who want to set aside retirement capital or save for big goals. Stocks especially are suitable for people over 35-40 years old, who earn a steady income and have clear financial goals.
Cryptocurrencies are attractive to young investors who are willing to take high risks for the sake of potentially high returns. This is a more suitable tool for those who are well versed in technology, follow crypto market news and are potentially ready to lose some part of their investment.
As for portfolio calibration, you can still take a conservative approach. For most investors, cryptocurrencies should not exceed 5-10% of the total portfolio. More aggressive investors can ramp up this share to 20-30%, but it’s important to remember that this significantly increases risks. The bulk of the portfolio should be kept in more reliable assets, such as shares of large companies, bonds and other traditional instruments.