Real estate investment vs. cryptocurrency

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In the face of a stagnating economy hampered by the Covid-19 pandemic, two investment options continue to stand out as viable and potentially fruitful opportunities: real estate and cryptocurrency.

Of course, while they are both popular options, they present two very different avenues for investors to pursue. Real estate has long been considered an integral part of a well-diversified portfolio; as its own asset class, it offers competitive, risk-adjusted returns in a market that is known for its low volatility – i.e. there is a low risk of big changes in a security's value.

In comparison, cryptocurrency is an investment of high risk and high reward. As digital ‘money’ that is bought and sold using blockchain technology, investment takes on many forms, from buying it directly to investing in crypto funds and companies.

While not easily comparable to real estate, the most tangible difference between the two is their contrasting market volatility. Real estate doesn’t see big swings in the market and is therefore relatively stable. Crypto, on the other hand, sees regular swings that can cost investors enormous portions of their shares. As such, it is not an option that is favoured by more conservative investors.

Risk v reward

First-time investors may well ask the question: Why would you invest in anything that is inherently risky? The answer is that any level of risk associated with a particular investment or asset class tends to correlate with the level of return the investment may achieve. Looking at risk and reward objectively, it should make sense that those willing to take more risk with their investments – and potentially lose money – should be rewarded with higher returns.

The right investment for you relies on your own financial background, your familiarity with the asset, and how much you are willing (and able) to risk. Purchasing bitcoin – one of the most popular cryptocurrencies – is low-maintenance, but it is high-risk with the potential for high reward. Real estate, meanwhile, is a long-term investment that could either end in a big pay-out further down the road or provide you with a steady income. 

Real estate as a safe bet 

Traditionally, real estate has been considered a very sound investment. Like any investment, real estate does carry some risk but compared to most other options, they are minor. The real estate market is subject to far less volatility than stocks, for example, even in the face of an economic downturn. This is why between 2010 and 2020, real estate ranked as the top investment pick for the majority (35%) of Americans, according to Gallup’s annual Economy and Personal Finance survey.

Its popularity is not solely down to safety, either. There are lots of ways to make money out of property; you can rent it for business or residential purposes, as a holiday let on Airbnb, or even flip it for profit. 

Real estate is beneficial as it can be used as a hedge against inflation, by generating positive cash flow and providing tax advantages as an investment. But the most attractive aspect is that real estate is a long-term wealth builder for investors. While some critics argue that it takes a long time to see profit, requires a big upfront investment and is time-intensive, the numbers suggest that it’s worth the time and effort.

According to the National Association of Real Estate Investment Trusts (NAREIT), the average annual return on all types of real estate has been 11.51% for the last 40 years (through June 2021) – a return that is close to the average annual rate of return on stocks.

Cryptocurrency means high risk, high reward 

A fairly new phenomenon, digital currencies are a medium of global exchange. Backed by blockchain technology, they are technological currencies offering an alternative to cold, hard cash.

Even those that aren’t particularly crypto-savvy may be aware of the recent downturn in the crypto market. Its major unravelling saw even its most popular currency, bitcoin – responsible for a third of the sector’s value – nosedive over a period of months. However, if investors are able to differentiate between reliable assets like bitcoin and the more unreliable options like dogecoin – which require collateral just to give them value – they will be privy to the many benefits that crypto is known for.

What goes down surely must come up, and if the market picks up again then it is an option that offers easy transactions, portfolio diversification and ultimately opportunities for massive gains. Let’s not forget that only last year, the price of Ethereum – another popular cryptocurrency – roughly doubled from July to December.

Its modernity means that crypto popularity is far from the heady heights of other investment opportunities. According to Pew Research Center, only 16% of Americans have invested in, traded or used cryptocurrency, while 56% of Americans have owned stock. So, it’s by no means mainstream in the same way as real estate. Yet.

A direct comparison 

As two of the most popular investment opportunities in today’s economy, the diversity surrounding both crypto and real estate means they are both exciting. While crypto offers an array of options, from investments that are real assets to those that aren’t, real estate has its own diversities. Not only are the types of assets diverse – ranging between single-family homes, flats, duplexes, townhouses, and multifamily residences – the ways you can invest vary too. You can look at a steady rental income, flip houses or seek out fruitful opportunities in crowdfunding investing with platforms like Bricksave.

Looking at the two options – real estate and cryptocurrency – through the lens of real-world examples may provide a better insight into the right move for you. Take real estate residential investment (buy-to-rent) vs. bitcoin, two of the most popular options in their respective sectors.

While the former should begin generating cash flows, the latter doesn’t – it’s purchased on the expectation that it may be sold for a higher price in future. 

While comparisons can be made in increasingly granular detail, the choice comes down to what type of investor you are. Bitcoin is not necessarily a long-term investment nor a short-term investment, as it depends on the investor; whether they are a day trader, swing trader, a long-term investor – or a combination of all. Meanwhile, real estate is a long-term investment.

As the digital age takes hold of real estate, investors are showing interest in the merging of crypto and property. Tokenization converts real estate assets into several digital tokens which can be sold on an online marketplace, such as Bricksave, to give the purchaser ownership of that portion of the asset.

Whatever type of investor you are, Bricksave can support you in making the right choice for your circumstances.  

Bricksave Admin profile image
Bricksave Admin
Bricksave Team

June 28, 2022

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