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ETFs VS Cryptocurrency: An Unbiased Asset Allocation Guide for Millennials


Cryptocurrencies have taken center stage in the global financial and investment landscape because of their proven ability to deliver impressive ROI. In the years gone by, millennials have shown borderline fanatical love for equities in relation to conservative assets such as bonds and T-bills. However, in the last two years, millennials are showing borderline fanatical interest in cryptocurrencies.

The increased interest in cryptocurrencies is justified and understandable. The 2017 gains in cryptocurrencies were simply unbelievable. However, since the markets opened for trading this year, cryptocurrency assets have given back much of those gains and many people who came late to the crypto party are yet to recover much of those losses. This piece provides insight for millennials torn between investing in cryptocurrencies and traditional assets such as ETFs.

Here’s why ETFs are a great investment vehicle

Investing in an ETF is a slow but sure-footed and steady way to build wealth consistently for the long term. ETF investing for millennials is a particularly smart investment move because it diversifies your portfolio, hedge risk, and provide exposure to a fine mix of assets.

For one, ETFs are a cost-effective investment vehicle in that your portfolio is diversified and filled with a single order. In contrast, you’ll have to conduct multiple transactions buying individual stocks in order to create a traditional investment asset. The cost-effective nature of ETFs also spills into the fact that you don’t have to worry about losing all your profit on commissions, load feeds, and managing fees.

In relation to cryptocurrencies, ETFs are incredibly cheaper because they are not plagued by the huge spreads on crypto. More so, cryptocurrency investors often lose money when converting fiat to crypto to buy tokens and they lose more money when they want to convert their cryptocurrencies back to fiat.

The second reason ETFs are a great investment tool for millennials is the unrivaled simplicity of ETFs in relation to other assets. ETFs provide you with access to different industries and decent odds of emulating the performance of that industry without first spending a great deal of time learning about how the underlying assets works.

The simplicity of ETFs can also provide a faster route to investors interested in gaining exposure to cryptocurrencies without necessarily spending a great deal of time to learn how cryptocurrencies work. In the year-to-date period, about four new cryptocurrency ETFs have launched. CNBC reports that investors have invested more than $240 million into cryptofunds in the first of week of launch as the pent-up demand for cryptocurrencies continue to drive growth.

What’s the right investing balance for millennials?

Of course, it would be absurd to suggest that millennials should not invest in cryptocurrencies. For what it’s worth, millennials seem to have a better handle on cryptocurrencies than other demographics. Nonetheless, it might be reckless to hold most or all your investments as cryptocurrencies.

Technically, cryptocurrencies are speculative investments and you’ll do well to follow asset allocation conventions between speculative and conservative assets. For millennials, you may want to consider not holding more than 15% of your investment portfolio in speculative assets such as cryptocurrencies. The remaining 85% of your portfolio has better odds of long-term growth when diversified between large caps equities, small caps equities, bonds, and international equities.

In the final analysis, the most important thing is not to spend all your money without leaving anything left over for investments. It is also important to find ways to make your money to work for you instead of sitting on a pile of cash in your back account. Hence, each investor will need to find the investment strategy that works for them in terms of their capital, risk appetite, and financial literacy.

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