When I was a child, my parents went out of their way to teach me the importance of getting a good education, finding a well-paying job, and being independent. However, the concept of financial literacy was foreign to us. The closest my family came to investing was having several bank deposits, with the annual return barely covering inflation.
Being a true Gen-Zer, it wasn’t until 2017 and the first crypto boom that I learned about Bitcoin. At that time, social media was teeming with stories about people making big money on crypto, so I was very intrigued, to say the least. Luckily, I was spared the shame of losing money on memecoins — I was never much of a “risk” person, so I only bought a little bit of Bitcoin to dip my toes in the water.
Since crypto didn’t make me rich, the question remained: how do I achieve financial freedom without having to work until death? Without any family money at my disposal to start a business or invest in buy-to-let properties, I revisited the concept of investing more thoroughly.
The first thing I learned is that this is a complex market. There are numerous investment options and tools, making it nearly impossible for beginners to get a grasp.
The second thing I learned is that there was a lot of misinformation. Numerous platforms offered sky-high returns for buying into crypto, futures, start-ups, etc., with the majority being straight-up scams.
Almost 10 years later, equipped with a career in finance, I still don’t know how to become a millionaire through investing, and I wouldn’t dare give you any financial advice. Instead, in this article, I want to explain the basics of the most popular investment options so that you can choose the option that fits your needs best and explore it in the future.
By the time you’re done reading, you’ll be equipped with:
Although the average person probably associates “investing” with an online brokerage platform used to purchase stocks, bonds, crypto, and so on, the concept of investing dates back more than 400 years.
In the 1600s, the European shipping industry was booming. British, Dutch, and French vessels made regular commercial trips to the East Indies and Asia, bringing back valuable goods such as spices and silk. Although the demand for these products was high, the shipping process was very challenging.
Considering the costs and risks of a trip were too great for the ship owners to handle on their own, they began attracting investors for funding. In return, investors would receive a share of the profits if the voyage succeeded. To further minimise risk, investors often diversified their investments across multiple voyages.
Not long after, shipping companies emerged, making it possible for investors to buy the first stocks and leverage all the voyages a company undertook. At this point, these stocks came in the form of physical sheets of paper that could be bought and sold.
The real development of the investment markets and exchanges began in the second half of the 20th century with global digitalisation. As the chart below indicates, the global GDP skyrocketed in the 2000s, proving a significant impact of technology adoption on the economy growth.
The 2010s kicked off with technology advancing at an astonishing pace. By 2010, the market penetration rate of smartphones reached 27%, paving the way for a new era of mobile investing. Mobile applications and robo advisors (modern trading bots) flourished, providing consumers with lower fees, smart automation, and greater flexibility.
Considering there are hundreds of investment options today, it would be practically impossible to evaluate and compare them all. As such, I’ve chosen three of the most widely adopted investment markets and evaluated them in comparison with cryptocurrencies: commodities, stocks, and index funds.
What is a stock?A stock represents partial ownership in a company, entitling investors to a portion of its earnings and assets. Stakeholders, also known as company investors, can be described as co-owners of the company. The stock’s value fluctuates with the business’s performance, increasing or decreasing accordingly.
What companies can you invest in?You can buy the stocks of any company that has passed an IPO (Initial Public Offering) and, in the process of doing so, launched an exchange-traded stock. Popular options include:
Where can you buy stocks?Today, you can easily buy stocks online via specialised brokerages. You’ll typically need to provide some personal information, such as your ID and bank statements.
What is a commodity?A commodity is a basic good, usually a resource, used in commerce. Commodities are most often raw materials used to manufacture consumer products.
What commodities can you invest in?The most traded commodities can be divided into three main categories:
Where can you buy commodities?
What is a stock market index?A stock index is a collection of shares that indicate the performance of a sector, exchange, or economy. Typically, it includes a fixed number of top shares from a particular exchange.
While a stock index itself has no intrinsic value, it tracks several stocks and moves in points, reflecting the prices of its underlying assets. Some indices give equal weight to all their stocks, while others prioritize larger stocks.
What is the difference between stocks and indices?A stock allows you to get part ownership in a single specific company. An index fund, on the other hand, is a collection of assets that typically includes shares from various companies, along with bonds and other types of investments.
Where can you buy indices?Similar to the process of purchasing stocks, you can buy indices online via brokerage platforms.
What is a cryptocurrency?A cryptocurrency is a form of digital asset based on blockchain technology. Although most people associate crypto with Bitcoin and Ethereum, at the time of writing, the cryptocurrency market consists of over 10,000 assets and has a market cap of over $2.4 trillion.
Where can you buy cryptocurrencies?Digital assets can be purchased using online crypto exchanges. However, be mindful to choose a reliable platform that operates legally and has a proven track record to avoid getting scammed.
Now, let’s move on to a practical comparison – a practical comparison between crypto and traditional investment options — stocks, indices, and commodities. We’ll not only see the dynamics of each of these assets over the last 3-5 years but also compare their profitability.
Let’s compare the historical prices and profitability of the two most popular cryptocurrencies, Bitcoin and Ethereum, with stocks of four giants: NVIDIA, Microsoft, Apple, and Google.
Comparing Price DynamicsSince 2024 (1.01.24–1.07.24) | Since 2022 (1.01.22–1.07.24) | Last 5 years (1.07.2019 –1.07.2024) | |
BTC | 42.26% | 31.67% | 496.16% |
ETH | 46.25% | -8.69% | 1076.22% |
NVDA | 158.06% | 312.67% | 2892.12% |
MSFT | 23.15% | 36.44% | 236.62% |
AAPL | 16.76% | 19.09% | 330.17% |
GOOGL | 232.71% |
*The main difference between the GOOG and GOOGL stock ticker symbols is that GOOG shares have no voting rights, while GOOGL shares do.
Source: TradingView
Insights:
2020 | 2021 | 2022 | 2023 | 2024 | Sortino ratio | |
BTC | 304.45 | 59.4 | -64.24 | 155.68 | 44.47 | 3.94 |
ETH | 473.21 | 398.52 | -67.5 | 91.04 | 47.52 | 3.65 |
MSFT | 42.53 | 52.48 | -28.02 | 58.19 | 19.48 | 2.34 |
NVDA | 122.3 | 125.48 | -50.28 | 239.02 | 138.52 | 4.58 |
AAPL | 82.31 | 34.65 | -26.4 | 49.01 | 8.39 | 0.99 |
GOOGL | 31.03 | 65.17 | -38.67 | 58.83 | 29.23 | 2.39 |
Source: TradingView
*Comparison of risk-adjusted performance of crypto vs traditional markets assets in terms of Sortino Ratio. The Sortino ratio is used to determine the risk-adjusted return on investment. It is a refinement of the Sharpe ratio but only penalises the returns, which have downside risks. The higher Sortino ratio, the better risk adjusted returns are. Sortino ≥2 – good, = 0-1 – satisfactory; ≤0 – unmitigated risk.
Insights:
Insights:
Now, let’s compare the historical prices and profitability of Bitcoin and Ethereum with four popular indices:
Since 2024 (1.01.24–1.07.24) | Since 2022 (1.01.22–1.07.24) | Last 5 years (1.07.2019 –1.07.2024) | |
BTC | 42.26% | 31.67% | 496.16% |
ETH | 46.25% | -8.69% | 1076.22% |
S&P 500 | 15.44% | 14.15% | 84.7% |
UKX | 5.77% | 8.82% | 8.93% |
SXXP | 7.22% | 4.71% | 32.27% |
DAX | 9.07% | 14.17% | 46.08% |
Source: TradingView
Insights:
2020 | 2021 | 2022 | 2023 | 2024 | |
BTC | 304.45 | 59.4 | -64.24 | 155.68 | 44.47 |
ETH | 473.21 | 398.52 | -67.5 | 91.04 | 47.52 |
S&P 500 | 16.26 | 26.89 | -19.44 | 24.23 | 14.22 |
FTSE | -14.21 | 13.58 | 1.3 | 3.55 | 6.88 |
DAX | 3.55 | 15.79 | -12.35 | 20.31 | 8.36 |
SXXP | -4.04 | 22.25 | -12.91 | 12.76 | 7.29 |
Year-over-year returns; crypto vs major indices
Source: TradingView
Source: TradingView
Insights:
Lastly, we arrive at the final comparison group: crypto vs. major commodities. As you have probably guessed, this section will also feature BTC and ETH as cryptocurrencies, as well as the most traded commodities:
Since 2024 (1.01.24–1.07.24) | Since 2022 (1.01.22–1.07.24) | Last 5 years (1.07.2019 –1.07.2024) | |
BTC | 42.26% | 31.67% | 496.16% |
ETH | 46.25% | -8.69% | 1076.22% |
GOLD | 13.23% | 29.42% | 68.52% |
SILVER | 24.48% | 28.58% | 94.50% |
BRENT | 18.78 | 9.58% | 48.36% |
WTI | 13.77% | 8.67% | 6.41% |
Source: TradingView
Insights:
2020 | 2021 | 2022 | 2023 | 2024 | Sortino ratio | |
BTC | 304.45 | 59.4 | -64.24 | 155.68 | 44.47 | 3.94 |
ETH | 473.21 | 398.52 | -67.5 | 91.04 | 47.52 | 3.65 |
Gold | 25.08 | -3.65 | -0.29 | 13.05 | 12.67 | 2.32 |
Silver | 47.65 | -11.65 | 2.71 | -0.68 | 22.86 | 1.49 |
BRENT | -21.68 | 50.35 | 10.56 | -10.6 | 10.45 | 0.23 |
WTI | -20.42 | 55 | 7.16 | -11.59 | 14.77 | 0.26 |
Source: TradingView
Insights:
That is a question only you can answer for yourself. As mentioned, there are no shortcuts or guaranteed paths to becoming a millionaire.
First of all, I highly advise you not to trust investment advice you find online without extensive research. Each asset has its pros and cons, and your choice should depend on your personal financial situation and goals.
In this article, I aimed to provide you with the basic information and knowledge needed to compare cryptocurrency with traditional investments, enabling you to conduct further research with a clearer understanding than a simple Google search would offer.
DeFi (Crypto) | TradFi (stocks, indices, commodities) | |
Profitability | High | Low-moderate |
Risks | High | Moderate |
Regulation | Under regulated | Regulated |
Value | No intrinsic value | Intrinsic value |
Accessibility | High | Moderate-low |
Susanna Bondarenko, Content Marketing Lead at CoinsPaid, has been creating and managing content since Bitcoin’s price was in triple digits. One of the leading voices in the crypto industry, Susanna has been included in the 2023 Rising Women in Crypto Power List. Her blend of finance knowledge and a background in English and German philology helps her break down complex crypto concepts for everyone to understand.