I am seeing bitcoin price rise much faster than any other investment option. Should i take out my money from mutual funds and invest in bitcoin? Will it give better returns?Asked
The decision of whether you want to stay invested in mutual funds or buy bitcoin depends to a very large extent on variables like investment objective, risk taking capacity, etc. If you are comfortable with taking a high degree of risk, even in mutual funds, you have the option of investing in schemes that are equity oriented or you can invest in debt oriented funds if you do not wish to take risk exposure.
You can also withdraw regularly from your corpus to meet your financial needs under the Systematic Withdrawal Plan, or you can invest in Systematic Transfer Plan that will enable you to gain from upswing in the equity market and hedge yourself from the downswing.
Bitcoins, on the other hand, are anything but safe investment. I am sure your news feed has recently been buzzing with how the price of bitcoin has gone up exponentially in just a matter of few days, even few hours.
However, if you check carefully, the reverse is also true. The prices of bitcoin have also fallen steeply within a matter of few hours. Bitcoins are not backed by the government, meaning they are not accepted as legal tenders, and therefore can only be used for limited legit purposes. Because they are not recognized by the government, in case they are lost or stolen, there is no recourse available to the investor.
Bitcoins are also not very liquid in the sense that there are only a few exchanges from where you can purchase or sell bitcoins for cash. Mutual funds are liquid instruments, and the investor can exit from the scheme at any time he wants, subject to paying exit load wherever applicable. You can read more about bitcoins as suitable investment avenues here.
Mutual Funds are, therefore, better investment instruments.
Bitcoins are highly risky and unstable instruments to invest in. Bitcoins can make you rich or take away everything you own within a day. It is a game of risk assessment and requires investors to have knowledge of what they are doing.
Reasons why not to invest in bitcoins:
Mutual funds on the other hand are a much safer option to invest in. Even the high risk mutual funds are safer when compared to bitcoins.
Recently we have heard lot about Bitcoin in news due to kind of returns it is giving to investors. It is no surprise that Bitcoin, a secure, global, and digital currency has claimed the interest of investors.
But Bitcoin is very very risk investment option as compared to mutual funds and putting a bulk of your investment in Bitcoin is not advisable.
Various risk involve in investment on Bitcoins:
Mutual funds are highly risk averse as compared to Bitcoin and gives you good return too. The best thing about investing in mutual fund is that it provides you wide scope of investment option depending on your risk appetite.
Bitcoin is like a risky gamble. Every investment has an objective and every investment decision is driven by risk- return trade off that the investor is willing to accept/ take on. Mutual funds have proven to be a safer and more reliable wealth creator In the long run as compared to bitcoins. One may invest a small proportion of their total investment in bitcoin (if only to enjoy the bullish short-term trend), as it is not safe to rely completely on bitcoins because-
However, it is a high risk – high return game.
Alternatively, mutual funds (though also subject to market risks) are a safer investment option with a proven track record. There are various mutual funds schemes catering to the risk – return appetite of the investor. Investors looking for higher returns (while accepting higher risks) may consider some high risk mutual funds instead.
Investors may invest a portion of their investment, in bitcoins (which they would not mind losing), however it is not advisable to invest most/greater portion of the funds in bitcoins.