Investments Worthy Of Your Money: Alternatives To Bitcoin

Bitcoin is a decentralised digital currency that can be sent between users without a third-party intermediary. It is a blockchain-based, decentralised digital currency powered by a network of users that allows financial transactions without relying on a central authority or intermediary. However, there are other investments that are better than Bitcoin.

- Bump up your contributions: Increase your contributions to a 401(k) to give your future self a financial cushion.

- Start growing a savings account: Ensure your emergency savings are solid before investing in anything risky.

- Tackle high-interest debt: If you have any high-interest debt, make it a priority to pay it off.

- Invest in yourself: Invest in advancing your career, such as by attending a conference or taking a course.

- Invest in other ways: Diversify your investment portfolio by investing in other assets, such as stocks, bonds, or other cryptocurrencies.

Growth ETFs

Large-growth portfolios, a type of Growth ETF, concentrate their investments in large US companies that are expected to grow faster than other large-cap stocks. Specifically, large-growth ETFs focus on stocks in the top 70% of the US equity market capitalization, defined as large-cap. This classification is based on high growth rates for earnings, sales, book value, and cash flow, as well as high valuations and low dividend yields. Most large-growth portfolios concentrate on companies in rapidly expanding industries, aiming to capitalize on their above-average growth potential.

Some examples of large-growth ETFs include:

• IShares® ESG Advanced MSCI USA ETF
• Direxion NASDAQ-100® Equal Wtd ETF
• JPMorgan US Momentum Factor ETF
• Vanguard Mega Cap Growth ETF
• IShares Morningstar Growth ETF
• IShares Core S&P US Growth ETF

Growth-centric ETFs provide investors with exposure to a diversified basket of securities that are carefully selected for their growth characteristics. These ETFs offer a convenient way to gain access to a range of companies with strong growth prospects, without having to select individual stocks. By investing in a Growth ETF, investors can benefit from the expertise of the fund managers in identifying companies with the most promising growth trajectories.

Dividend stocks

• Reinvesting Dividends: Investors can choose to reinvest their dividends if they don't need the immediate income. Reinvesting dividends can significantly enhance your overall return on investment. For example, the historical total annual return of the S&P 500, including dividends, has been about two percentage points higher than the index's annual change in value.
• Evaluating Dividend Stocks: When evaluating a dividend-paying stock, it's important to compare the dividend yields among its peers. A much higher dividend yield compared to similar companies could be a red flag and warrants further research. Additionally, look at the stock's payout ratio to understand how much of the company's income is going towards dividends. A payout ratio above 80% is generally considered high and may indicate that the company is putting a large portion of its income into dividend payments.
• Building a Portfolio: Building a portfolio of individual dividend stocks takes time and effort. It's important to diversify your portfolio by investing in multiple companies from different industries. Determine how much of your portfolio you want to allocate to each stock based on your risk tolerance and investment goals.
• Tax Implications: Keep in mind the tax implications of dividend stocks. Dividends in taxable brokerage accounts are typically taxed in the year they are received. For investors in high-income brackets, dividend stocks may not be as tax-efficient as other investment options.

• REV Group Inc (REVG)
• Pennymac Mortgage Investment Trust (PMT)
• Franklin BSP Realty Trust Inc. (FBRT)
• AG Mortgage Investment Trust Inc (MITT)
• Seven Hills Realty Trust (SEVN)
• Angel Oak Mortgage REIT Inc (AOMR)
• Evolution Petroleum Corporation (EPM)
• CVR Energy Inc (CVI)
• Insteel Industries, Inc. (IIIN)
• Artisan Partners Asset Management Inc (APAM)

Small-cap stocks

However, small-cap stocks are more volatile and riskier than large-cap stocks. They are also less popular and have less available information, making it harder to find a seller or buyer when you want to enter or exit the market.

Some of the best-performing small-cap stocks of 2024 include Aris Water Solutions Inc., Blue Bird Corp., Endeavour Silver Corp., and GigaCloud Technology Inc.

Retirement savings

While Bitcoin and other cryptocurrencies are trendy investments, they are highly volatile and largely unregulated. For retirement savings, it is generally recommended to invest in tried-and-true asset classes like stocks and bonds, which have a track record of long-term growth potential.

Long-term growth potential

Stocks and bonds have a long history of providing steady returns over time. On the other hand, Bitcoin and other cryptocurrencies are relatively new and highly volatile, making them unsuitable for long-term investment.

Regulation and government backing

Stocks and bonds are typically traded on regulated exchanges and backed by governments, ensuring a level of protection for investors. Cryptocurrencies, on the other hand, are largely unregulated and not backed by governments, meaning there is no guarantee of their value or safety.

Intrinsic value

The value of stocks and bonds is tied to the performance and assets of the underlying companies, giving them intrinsic value. Cryptocurrencies, on the other hand, are not tied to any underlying asset, and their value is purely based on market speculation.

Tax implications

Investing in stocks and bonds through tax-advantaged retirement accounts, such as 401(k)s and IRAs, can provide significant tax benefits. While cryptocurrencies held in these accounts may also offer some tax advantages, their complex and evolving nature makes it challenging to navigate the tax implications effectively.

Diversification

Diversification is a key component of any investment portfolio, and stocks and bonds offer a wide range of options for investors to diversify their holdings. Cryptocurrencies, on the other hand, are a relatively new asset class with limited options for diversification.

While it's important to note that past performance does not guarantee future results, the historical data and established nature of stocks and bonds make them a more stable choice for retirement savings compared to the volatile and unpredictable nature of cryptocurrencies like Bitcoin.

Clearing debt

Bitcoin is a risky investment that can leave people in deep arrears. It is an uncertain investment that should be treated with caution. People should never jeopardise an asset as safe as their house for volatile cryptocurrencies.

Unsecured debts like credit cards, store cards and overdrafts should be paid off first. These types of debt typically have high interest rates and will have a much bigger impact on your credit rating than secured debt. The longer you borrow money for, the more you will pay back in interest, so unsecured debts can become a huge drain on your money.

For example, if you have spent £500 on a credit card at 15% APR, that debt would cost you £75 a year. If you had £500 spare, you could choose to pay off your unsecured debt or put your £500 into a savings account. With a typical interest rate for a cash savings account being around 1%, after a year, you would have £505. So, saving your money would make you £5, but you would still owe an extra £75 on your credit card, so you would be better off financially to pay off your credit card before saving.

Once your debt is clear, you can start planning for the future. It is recommended to build emergency savings first. Emergency savings are a pot of money that’s easily accessed for unexpected events – like losing your job or your car breaking down.

In summary, clearing debt should be a priority over investing in Bitcoin. Unsecured debts with high interest rates will have a bigger impact on your credit rating and will cost you more in interest the longer you leave them. Once your debt is clear, you can start to build emergency savings.

Frequently asked questions