Diversification of the investment portfolio is one of the most important strategies that investors resort to by owning many assets and reducing the risk of falling global markets, and investment diversification ensures rebalancing your portfolio regardless of the type of assets you own and helps you earn more gains in long-term investment.
In light of global economic conditions, with fears of a possible global recession and continued interest rate hikes in many countries to fight inflation, it is difficult for investors to make their choices about the best investment mechanisms available.
Therefore, investors resort to diversifying their investments to identify safe and least risky assets, and for many years it has been customary for investors to hold their savings, whether in real estate, stocks, bonds or gold.
For centuries, gold has been considered one of the main hedges against inflation, but more and more people are starting to see cryptocurrencies as a store of value, thus earning a reputation for bitcoin as "digital gold."
The American website Investopedia, which specializes in investment education, published an article explaining the difference between investing in Bitcoin and gold.
The report first noted some important definitions:
What is a value store?
The store of value is an asset that does not lose value over time, paper money is a bad store of value, and cash can be used as a medium of daily exchange and short-term liquidity, but over time it will lose its value.
What is inflation?
Inflation is the primary tool used by governments around the world to control the money supply and price movements.
Authorities devalue their currencies slightly every year, prompting people to increase spending or investment in the hope that this will spur economic growth through job creation.
Therefore, money loses value over time, and savings must be stored in an asset that retains its value, which is why people invest in buying gold or stocks, bonds, real estate, and other assets that maintain their value or even increase in value over time in order to profit.
Investing in Gold
When financial markets are under pressure, investors buy gold as a "safe haven," and even when the economy is buoyant, they buy more jewelry.
One of the important points that support investment in gold is that its ownership is spread all over the world and is mined in almost all countries.
A report published by the website "TheMotleyFool" and compared investment in gold and cryptocurrencies indicates that the performance of gold amid high inflation this year has not been good, and despite its trade as a rare commodity and safe haven, its prices fell about 20% last September from their peak in March.
The report points out that one of the main factors for gold's performance is the strength of the US dollar, which reached its highest point in two decades during the recent period, and with the economic slowdown in China and Europe, investors scrambled for it, which means that investing in gold does not tend to perform well when the dollar is strong.
Investing in cryptocurrencies
When compared to gold, the demand for cryptocurrencies is limited to "speculation", and investors view them as "a high-risk bet with high returns".
The report notes that cryptocurrencies are exposed to significant price fluctuations, as their prices rise and fall based on speculation.
Although cryptocurrencies are available to everyone, entities in 5 countries control 80% of the mining capacity of the Bitcoin network, and 2% of the owners of this coin own 95% of all available bitcoins.
The report shows that gold moves in isolation from the stock markets, while cryptocurrencies do not follow this pattern.
He asserts that Bitcoin and cryptocurrencies still lack a longer period of time to know whether they can be an effective means of hedging against inflation or not.
It shows that it is relatively easy to buy and sell cryptocurrencies and gold, but gold still has a more "solid" advantage in its trading.
On the other hand, Analyticsinsight published an article by a group of financial advisors on the best ways to invest money in real estate, which stated the following:
Buying a property for rent
One of the best investments you can make is renting real estate, because you are able to generate income from your tenants, and rental properties can be a great way to diversify your investment portfolio and protect yourself from stock market volatility.
In addition, if you can find a tenant willing to pay rent higher than property payments you will be able to generate a steady income every month, and once you make more money than the initial purchase price you will have a secondary source of income forever.
Partial investment in real estate
Platforms like Fundrise and Groundfloor allow you to partially invest in real estate or invest in real estate index funds, meaning you can own a piece of property – such as a residential complex – without having to set the entire purchase price yourself.
Fractional ownership gives you all the benefits of owning real estate, such as monthly cash flow without the hassle or expense of being a property owner, in addition you can start with as little as $10 and there are no processing fees.
There are also many emerging artificial intelligence applications for real estate investors that are worth reviewing, and this is one of the best ways to invest your money with many options, and it is important to do research and choose the right investment for you, as well as remember to diversify your portfolio to reduce risks and not invest in something you do not understand.