You probably have some cash lying around and you are thinking about how you can invest before you end up squandering it.

Your friends, parents and even financial advisor have all been telling you different ways you can double the amount but you are still looking for better options, even though your mind is now split between two options: real estate and this new thing called Cryptocurrency.

There have been so many stories about real estate so let me tell you one about Cryptocurrency.

In 2010, a man from Jacksonville, Florida, made the first real-world purchase with Bitcoin. He bought 2 pizzas for 10,000 bitcoin. At the time, that was a fair price for 2 fast-food pizzas. If this man skipped his dinner and kept his bitcoin, he’d be sitting on close to half a billion dollars worth of cryptocurrency today.

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That brings us to our discussion; would you rather invest in cryptocurrency instead?

Choosing between real estate and bitcoin can be baffling, especially for the modern-day investor. Traditional investors will argue that real estate is the best form of investment because “land always appreciates”.

A millennial investor will also say that bitcoin supersedes every other form of investment since it has yielded a massive ROI in just 12 years.  However, like all types of investments, they both incur unique risks.

If you have been considering these assets and are looking to select the option that’s a good fit for you, let’s examine the pros and cons of each investment.

Pros for Real Estate

• Tangible asset.

• Versatile investment opportunities.

• High cash flow.

• Long-term returns.

Cons

  • High maintenance cost
  • Owners need to collect rent and worry about utilities
  • Pricey up front
  • Not fluid and can be sometimes difficult asset to unload
  • Taxes and other charges
  • Might turn out to be a dead investment in the end

Cryptocurrency, the most popular of which is bitcoin, is one of the newest investment options available. Bitcoin has become a go-to alternative for investors who want diversification that can deliver market-beating results. 

One big benefit of bitcoin investment is the currency can never be inflated since there will always be a limited number of bitcoins to go around.

At Market Cap Trainers, we have always encouraged Kenyans to consider investing in cryptocurrencies just as much they have in other traditional ways…albeit with calculated risk exposure on one’s portfolio.

But as good it looks, it also has its pros and cons. Before we look at them, let’s first start with the characteristics of bitcoin because it’s what most Kenyans are investing in.

  1. Decentralized- Conventional currencies like Yen, Dollar, and Euro are controlled and regulated by central banks. Bitcoin is not controlled by a single institution.
  2. Anonymous- Financial institutions know almost everything about their customers; phone numbers, credit history, spending habits, etc. With Bitcoin, people can transact without revealing their identity.
  3. Transparent- All Bitcoin transactions are stored permanently on the Blockchain which is public.
  4. Safe-haven – Being the first cryptocurrency, Bitcoin has proven to be a reliable and secure asset.

Pros of investing In Crypto

  • Peer-to-peer system.
  • Governed by economic principles.
  • No inflation.
  • Easy to trade.
  • Long-term upside with the potential for seemingly exponential gains.
  • No maintenance.
  • Lower cost of entry

Cons

  • Not tangible which is a big issue still for many in Africa
  • Security issues. It’s prone to cyberattacks along with other types of cybercrimes that could alleviate you from your investments.
  •  Can be a bubble — sometimes it’s hard to undertand it’s true value.
  • No dividends or rents paid by owning crypto, so no passive cash flow opportunities.
  • High volatility. One minute it’s flying high and the next it’s giving you high blood pressure after nose diving. This volatility makes it hard for even the most risk-tolerant investor as you know at any time you could lose the entire value of your investment.
  • Little/no government involvement.

Verdict

As you build out your investment portfolio, your best investment really depends on your personal financial background, your familiarity with the asset and how much you are willing to risk.

Purchasing bitcoin is low-maintenance and high-risk with the potential for a high reward, while real estate is a long-term investment that could end in a big payout down the road, provide steady income or might even not turn out to be much given how real estate has been in Kenya and Africa in general.

All risks considered, the rule-of-the-thumb opinion would be that if you’re older and not the tech-savvy type probably in your 50s or 60s, stick to real estate unless you are a risk-tolerant investor who understands that you can lose it all in a second.

But if you are a millennial co-existing in this microwave generation and doesn’t want to wait 20, 10 years to see their investments pay back, the YOLO generation, cryptocurrency then might be an option worthy exploring.

You will sleep a poor man and wake up a billionaire the next day.

The reverse of which is also true.

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