Bitcoins have recently caught the imagination of investors all around the world.
Bitcoins have recently caught the imagination of investors all around the world. However, when compared to mutual funds, they totally have different investing rules and processes.
As we know, bitcoin is a cryptocurrency and mutual funds are investment avenues in which investors pool in their money and fund managers look after it.
There are two ways to make investments in bitcoins i.e. either by buying and holding them until profit is made and the second is by mining. Mutual funds, on the other hand, can be purchased directly from a mutual fund company, a bank, or a brokerage firm.
For choosing between these two investment modes, Adhil Shetty, CEO of Bankbazaar asks individuals to first define clear goals in terms of what they wish to venture, what their returns expectations are, and how long they are prepared to wait for returns and redemption.
Secondly, they should access their risk-taking ability.
“It's not right to venture into what one can’t risk losing. Buying any asset at peak prices may lead to losses in the short-term, but it's better to ask how long one is prepared to hold on for the profits," Shetty suggests.
While there is a lot of ongoing interest in cryptocurrencies, Shetty further advises individuals to focus on something that’s time-tested and less volatile – which is where mutual funds come in.
"Investors may limit their punts on crypto as per their risk-taking ability," he explains.
Rachit Chawla, CEO & Founder, Finway FSC also recommends investing in mutual funds over bitcoins.
"When investors buy shares, they are actually becoming owners, they are part of the assets which are owned by the company. So, everything is very tangible in the case of mutual funds and equities. On the other hand, bitcoin is mostly speculation and it's still unknown what it is exactly backed buy," Chawla says.
Additionally, bitcoins may give higher returns in the long-run but it's highly unpredictable and as returns are high, so is the risk.
Hence, Yashpal Sharma, Vice President, Taurus Mutual fund, suggests investors to take exposure in bitcoins only with this mindset.
"While, mutual funds are more regulated and tend to bring returns that are stable over years, except while changing market conditions. There are pros and cons of investing in mutual funds as well, but these types of instruments are very transparent as compared to bitcoin," according to Groww—an investment platform.
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(Edited by : Ajay Vaishnav)
First Published: IST