Bitcoin vs stocks 😬
🔸 Plus: Abba acquired the Kiss back-catalogue for $300 million 🔸 There are only 25 ISA millionaires 🔸 What it’s like to get scammed out of your life savings 🔸
Hello! Here’s today’s 2-minute guide to demystifying money and making you richer
The markets, year to date
S&P 500: 5,211.49 ⬆️ 9.88%
FTSE 100: 7,937.44 ⬆️ 3.2%
Bitcoin: $66,250.60 ⬆️ 49.98%
GBP to USD: $1.266 ⬇️ 0.54%
GBP to EUR: €1.1659 ⬆️ 1.10%
Bitcoin vs stocks — which is best for you?
Bitcoin price chart over the last five years.
At Moneyin2 we have argued that passively investing in an S&P 500 or Nasdaq tracker fund will get you better results than the professionals, and that a mixture of the S&P and the Nasdaq may be better than the traditional 60/40 mix of stocks to bonds — especially if you are young.
The reason: If you have a long way to go before retirement, you can afford to wait out the volatility and risk that comes with an all-stock portfolio. Even if your investments take a hit they’ll probably still be in a better place than if you’d been more conservative with bonds.
By this logic, you might ask, shouldn’t you invest a bunch of money into Bitcoin?
After all, despite Bitcoin’s notorious volatility, its gains over the last five years have been greater than those of the S&P 500 index of stocks:
We’re here to tell you: Do not do this.
Look again at that Bitcoin chart. Between its peak price of $64,000 in November 2021 and the low that followed in late 2022, Bitcoin lost about 75% of its value.
That is waaaay too much risk and volatility for your savings, if your goal is financial security and independence.
Imagine how you’d feel if you built up substantial wealth in Bitcoin only to see three-quarters of it wiped out overnight.
The market can stay down longer than you can stay solvent
Sure, Bitcoin has gone up again since then. But when you’re stuck in a down market you have no idea when prices might pick up again. And the market can stay down a lot longer than you can stay solvent.
Example: Bitcoin hit an all-time high in 2017, and then immediately lost 83% of its value. It didn’t regain that peak for three more years.
Stocks tend not to do this, and that’s why they’re a safer place to build wealth. Yes, the stock market goes through periodic collapses. Between the end of 2021 and 2022 the S&P lost about 25% of its value. It was an ugly period for investors:
The S&P 500
But within two years the market clawed its way back. Crucially, no one who stayed in the market lost more than that 25%. And they only had to wait one year for their fortunes to be restored from the low point.
Yes, markets go up and down. There is risk. You can lose money investing, for sure. And down-markets can last a long time.
The real difference between stocks and bitcoin
But the difference between stocks and crypto is that stocks represent something that is actually real. When you buy Apple stock, you really are a part-owner of the company that makes the iPhone. Apple isn’t going bankrupt anytime soon. It’s certainly not going to lose 75% of its value. Apple stock is backed by assets that are real: the technology, rights, and intellectual property that Apple owns. And when Apple pays dividends to its shareholders, that money is real, too, and you’ll get some of it.
Bitcoin, by contrast, isn’t backed by anything real. Buying Bitcoin doesn’t entitle you to part-ownership of any underlying asset. A Bitcoin is just a piece of code controlled by cryptographic software. Its price reflects only one thing: Whether there are more or fewer people willing to buy or sell other Bitcoins.
The reason Bitcoin is so risky is that sometimes most people really don’t want to buy it. On a routine basis, people wake up and realise that they just can’t do much with their crypto, other than sell it to someone else. That’s why crypto goes through regular, frequent price collapses.
You don’t want the bulk of your personal wealth tied to a market as fragile as that. That’s why even the professionals — the investment managers whose job is to sell you Bitcoin — recommend only a tiny portion of your savings should be in Bitcoin.
And for dessert …
Abba acquired the Kiss back-catalogue for $300 million. In the deal, Pophouse, the company behind the Abba Voyage hologram show in London (founded by Abba’s Björn Ulvaeus) will create Kiss avatars for a new “live” show.
There are 25 people in the UK with an average of £11.6 million in an ISA. Not bad considering you can only put £20,000 a year into an ISA.
The gender pay gap at Goldman Sachs in the UK increased. The difference between men and women’s total pay now stands at 54% because women are underrepresented in the bank’s top levels.
Someone asked ChatGPT to try day-trading stocks. It did OK, making trades based on business news headlines. Do not try this at home!
A redditor describes what it’s like to get scammed out of your life savings. “Bank fraud alert” scams are more sophisticated than you think.
Short sellers are attacking Donald Trump’s media company. At the beginning of the week Trump Media & Technology Group disclosed it had little revenue, big losses and its accountants expressed doubt about whether it was a going concern.
More from Moneyin2:
The savings account with a 25% return that young people routinely ignore
Ignore financial influencers - the stats say they’re usually wrong
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