SINGAPORE — Stocks may be the best-known and easiest form of investing, but cryptocurrency seems to be the next big step in recent years as well. So which should millennials choose to invest in: stocks or cryptocurrencies? And is there a better option?
This is part of a series in which: Yahoo Finance Singapore will focus on various aspects of millennials and their finances. In this first part, we will find out whether it is better for millennials to invest in stocks or cryptocurrencies.
Diversification as a baseline
First, it’s important to know what you’re getting yourself into. Investing in stocks can include a variety of investment vehicles, such as exchange-traded funds, index funds, government bonds, futures, warrants, and commodities trading. They are usually made by investing a small amount each month.
Meanwhile, cryptocurrencies are digital assets that people can use as investments or for online purchases. It basically works by exchanging real currency to buy “coins” or “tokens” of some kind of cryptocurrency.
Therefore, the short answer to whether stocks or cryptocurrency is a better investment is that it depends on your financial needs and desires. In fact, the financial experts who Yahoo Finance Singapore spoke to advised that millennials should actually invest in both stocks and cryptocurrency.
“Ultimately, your financial portfolio needs to be diversified, and you can always choose to invest in both stocks and cryptocurrencies as they perform different functions,” said Catherine Seah, 22, student financial advisor.
Echoing a similar tune, Asheesh Chanda, CEO of Kristal.AI, a leading digital private wealth platform in Singapore, said: “Investments should be seen as a variety of modes of transport that help people achieve their goals. Each mode offers certain benefits and brings certain benefits. costs.”
For example, if you can only afford to invest a small amount each month, investing in stocks is the way to go as it is cheap and an effective way to access the markets. Otherwise, if you take more risk, cryptocurrency can be a better option for long-term profits.
Stocks as the safest option?
Still, it seems that most millennials are still inclined to invest in stocks without diving too much into cryptocurrency.
According to brokerage firm Tiger Brokers, 45% of their Gen Z investors prefer long-term stocks such as Apple, Boeing and Carnival. Other data from an OCBC Financial Wellbeing Survey also shows that about four in 10 millennials who invest admitted to over-speculation in hopes of making a quick buck.
For example, 28-year-old marketer Gideon Lai has been investing in stocks for the past two years after thinking about how to make more money and get the most out of his money.
However, he also warns: “Seeing your returns grow is one thing, but being greedy is another. I think it’s important to strike a balance, especially if you don’t really have a strong financial knowledge.
Similarly, Colette Low, 22, a private university student, decided to invest in stocks because she sees it as a “good long-term investment.” Low, who has invested about S$5,000 a year since she was 19, added that she makes most of her financial decisions after reading about them online via social media.
“I think equities are already seen as a less risky option because they don’t require many financial commitments. It also helps that it’s easy to buy and that we can take advantage of it when the economy grows,” Low said.
As a rough guideline, experts don’t advise young investors to bet their big life goals on investments alone and keep them at less than 5% of their financial portfolio.
“At least some of the potential returns on stocks are speculative, and at the very least there’s just too much uncertainty. I recommend focusing on bigger financial goals, like planning a house, because those are reliable and proven things,” said Chuin Ting Weber, CEO of MoneyOwl, a bionic financial advisor.
cryptocurrency † the future?
Despite this, it seems that cryptocurrency is also making waves worldwide as a possible investment option for young people. According to a June 2021 Bankrate survey, millennials (aged 25-40) were the most comfortable of all age groups with cryptocurrency, with 49% feeling comfortable enough to invest in crypto assets such as Bitcoin.
In fact, other research data from the financial site Capitalize showed that 54% of millennials say they plan to incorporate cryptocurrency as part of their retirement strategy.
Recent graduate Reuben Tay, 25, is one of them as he believes cryptocurrency is the way of the future as cryptocurrency technology relies on security that allows users and owners to remain private and anonymous during transactions.
“I think cryptocurrency is enabling more digital access and ownership. Even people who do not have access to traditional banks can enter the financial system using cryptocurrency,” Tay said.
And while it’s a high-risk gamble where there’s a good chance you’ll lose all your money, Tay thinks the payout is worth it as long as you know what you’re doing.
“It’s important before investing in bitcoin or other cryptocurrencies to go in with your eyes open and always check that you aren’t falling into the trap of scams or false promises of returns. High,” Tay said.
With the rise of the cryptocurrency industry, it seems that companies are jumping on the bandwagon to make people more familiar with cryptocurrency payments.
Local ride-sharing company Ryde, for example, will accept crypto payments via Bitcoin starting in Q3 2022. Ryde users will have the option to choose from a growing list of more than 70 currencies and 10 blockchain networks to pay.
“We want to deploy non-fungible tokens in a way that generates more real global value, especially for the fast-growing market segment of Singaporeans who own crypto,” said Terence Zou, founder and CEO of Ryde.