ETF vs. Crypto Investing

ETFs and crypto are both very important types of investments. But, which one’s better?

First of all, let’s look at what an ETF is. An ETF is an “Exchange Traded Fund”, which means it is traded like any other stock or share on exchanges such as NASDAQ or NYSE (New York Stock Exchange). A credit institution -such as your bank- will buy all the shares of an ETF and will distribute them to its customers. You can buy or sell your ETFs online, quickly and easily.

ETFs are passive investment instruments that track indices of other assets such as commodities, shares, currencies… The price of an ETF is mainly determined by supply and demand on exchanges, which sets the new market prices of these financial instruments. What are cryptocurrencies? Cryptocurrencies are decentralized digital currencies that don’t have a central bank controlling their money flow. Their value is determined by exchanges too but it’s not backed up by anything tangible like gold or land assets -which give some sense of stability- nor is it controlled by any government authority -which would provide some credibility.

Now let’s look at what a cryptocurrency is.  In general, a cryptocurrency can be defined as a decentralized digital money created from computer codes with an open source that can be verified by network nodes and uses cryptography to secure transactions without any central administrator or authority such as banks or governments controlling it.

Let’s look at the pros of each:

ETF benefits

ETFs offer many benefits over traditional funds and individual securities:

1) Diversification with low expense ratios

Most traditional index mutual funds require high minimum investment amounts—which many retail investors can’t afford (and even if they can, such funds may come with high annual expenses). ETFs allow investors to get the index exposure they want at a much lower cost. In addition, the vast majority of ETFs have low expense ratios relative to actively managed mutual funds, so you don’t have to break the bank in order to diversify your portfolio with a single purchase.

2) Transparency

Many retail investors don’t have time to research individual companies thoroughly before placing a trade. However, not knowing what you’re getting yourself into can be financially hazardous. Before investing in an ETF, it’s important to understand where the money is going so you can make informed decisions about your actions going forward. For example, ignorance of the housing bubble is what many people believed to be the cause of the subprime mortgage crisis. If investors had done their research, they would have realized that these types of investments were quite dangerous—and most likely would not have jumped into them.

3) Lower taxes

Since ETFs are index funds by nature, they tend to incur fewer capital gains than actively managed mutual funds, which require frequent trading and rebalancing . This reduces tax liabilities for individual investors by eliminating unnecessary capital gains distributions at year-end.

4) High liquidity

ETFs are traded on major stock exchanges throughout the day just like stocks, so you can easily buy or sell at any time during market hours with relative ease.

5) Ease of use

Since 2001, ETFs have seen significant growth throughout North America and Europe, becoming one of the most popular investment vehicles among retail investors. This is because they are highly liquid due to being traded on major exchanges around the world 24/7/365. They also provide tax efficiency across multiple asset classes (stocks, bonds, commodities) while offering extremely low costs—which helps preserve your capital for future investments. ETFs can be an excellent choice for investors looking to initiate a position without incurring high trading costs. You can buy ETF on different platforms.

6) Diversification

ETFs provide you with an extremely diversified investment portfolio that’s easy to manage, maintain, and rebalance . For example, one single purchase of the SPDR S&P 500 ETF (SPY) grants you access to over 30% of the U.S. stock market index—and could potentially save you from having your entire 401(k) wiped out if there is a major market crash. In addition, many mutual funds charge first-year sales fees known as “loads,” which are nothing more than back-end commissions on top of all other fees expenses.

7) Less volatility

The volatility of cryptocurrencies has an impact on our portfolios because it can reduce its performance over time. ETFs don’t suffer nearly as much volatility compared to crypto, which can be good if you’re looking to safeguard your investment.

Crypto benefits

1) The future of digital payments and investments

One of the main reasons cryptocurrencies have performed so well over recent years comes down to the fact that it’s considered by many to the be the future of how we transfer money. Unlike fiat money, crypto can be transferred without any fuss and is likely the most practical way of exchanging funds. In the future, it could be the primary way people trade.

2) It’s still in its early stage

Crypto is still fairly new and being an early adopter could have enormous benefits. Unless its use and popularity declines, which many believe it won’t, then now could be the perfect time to be involved.

3) Potentially big gains

Despite volatility, the top performing cryptocurrencies have vastly outperformed the top stocks over the past decade. For example,  the closing price for Bitcoin (BTC) in 2012 was $13.45, on December 31, 2012. The closing price for Bitcoin in 2021 was just over $46,000.

4) Wide range of options

There are now thousands of cryptocurrencies to choose from. In fact, the number of crypto projects keeps growing and growing.


All in all, investing in either comes with risks. If you’d rather play it safe, then perhaps ETFs are more suitable for you. If you’d be willing to accept more volatility, but higher potential gains, then crypto could be a better option.

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