30 April 2018

Gold or Bitcoin? How we should think about investing in the future

Another month, another Bitcoin drama. The cryptocurrency that  (This link will open in a new window)surpassed £13,000 in 2017 and then fell to roughly £5,600 within months has become a media mainstay. 

Hardly a day goes by without a new story or analysis of the virtual currency's staying power — and whether you're a Bitcoin believer or not, it's difficult to avoid getting caught up in the hype.

With Bitcoin millionaires and other cryptocurrency enthusiasts arguing that the future lies with virtual currencies, it's easy to wonder whether you're missing out on a life-changing investment. True, Bitcoin's wild valuation ride has some deriding it as a scam rather than a promising money-maker. But the growing interest in it and other cryptocurrencies seems to suggest that they'll be relevant — or at least in the headlines — for some time to come.

Digital vs. Analog?

Bitcoin and other cryptos are just one digital investment vehicle. Even for those who are averse to crypto speculation and investments, there are plenty of digitally-based investing options. Fintech platforms now offer relatively low-cost entry into developing an investment portfolio, and those may strike young or amateur investors as less intimidating than going all in on physical but costly assets such as property, art, and jewellery.

Still, you can't help but wonder whether having a few more traditional assets might not be a good idea. What if the likes of Berkshire Hathaway CEO Warren Buffet and JPMorgan Chase's Jamie Dimon are right that cryptocurrencies will "come to a bad ending" and that " (This link will open in a new window)there will be no currency that gets around government controls"? It might be thrilling to go along with Bitcoin's wild ride, but the adrenaline rush may not be worth it if the cryptocurrency goes bust after all.

For some people, buying  (This link will open in a new window)tangible assets to insulate themselves against market-based risk is a more appealing option. Gold bullion, for instance, is a perennial favourite in this category, though some opt to diversify and buy silver as well.  (This link will open in a new window)Gold enjoyed a particular boost in the wake of the Brexit vote, with some viewing it as a preferable investment to standard stocks and bonds.

But while gold may seem in some ways to be the antithesis of cryptocurrencies, it's not as sure a thing as it might seem. Critics note that gold is not only volatile, but that it earns no returns, doesn't necessarily appreciate, and will be of little value in the event of an economic collapse.

While many people invest in stocks and even in gold with their future lifestyle in mind, others prefer to purchase tangible assets they can enjoy in the here and now, such as antiques, luxury cars, yachts or speedboats. Of course, they may find that the value of those investments drop in the event of an economic downturn, during which the market for boats and high-end goods tightens.

None of this is to say that investing in cryptocurrencies, buying and selling gold, or purchasing luxury items are good or bad choices. But given all the variables, it's important to remember that rushing to one extreme or another when it comes to investing may not serve your long-term interests.

Technology has not only created new investment options, it's also made it easier than ever to break into traditional investing, and that's undoubtedly a good thing. But when you're talking about your financial health, it's worth seriously evaluating even the most urgent trends before getting swept up in them.

Tech-Assisted Financial Planning

Knowing where to invest your money and how to establish financial security is complex, and the right decisions tend to depend on personal circumstance. Fortunately, technology has made it easier to strike the right balance. In addition to providing new ways for people to get involved in traditional investments, fintech companies are also creating unique opportunities for consumers to connect with financial advisers on their own terms so they can become more engaged with their own investment strategies.

That's important, because  (This link will open in a new window)only a third of the global population is financially literate. So, while access to financial products and platforms is undoubtedly a good thing, there's an ever greater need for sound advice on how to use them effectively.

As a novice at personal finance and investing myself, I'm keenly aware how daunting the various data and advice on these topics can seem. My initiation into investing came in 2013, when I bought about £30 worth of Bitcoin because my more economically-savvy friends were doing it and I didn't want to miss out on a great investment. While I've tried to be more diligent in my financial decisions since then, knowing the right path can be challenging.

We live in an incredible time, when we can pay bills, send money, look for mortgages, and even invest from the smartphone in the palm of our hand. But those of us who are new to the game may sleep better at night knowing we've got one foot in the digital space and one still planted in the analogue world.

The content displayed on our recent news and articles page is for information purposes only, and is accurate at the time of publication. The information will not be maintained, and so we cannot guarantee that at any given time the information will be up to date or complete. Please verify any information you take before relying on it.

Nationwide is not responsible for the content or availability of external websites. Nationwide does not make any recommendation or endorse any advertising, products, services or other content on such external websites. Views expressed on third party websites are those of the public and unless specifically stated, are not those of Nationwide.

About the author

Casey Hynes

Casey Hynes is a freelance journalist writing about fintech, AI, economic development and personal finance. She's written for the Wall Street Journal and the Washington Post.

Most popular

Alfred’s story

04.05.18

We're taking a look back at our first ever mortgage customer in 1884, Mr Alfred Idle.

You may also be interested in...

Our helpful guides

We've created a range of helpful guides to help you make better financial decisions regardless of your circumstances. Find out more about owning property, growing wealth and planning for life events.

Our products

Whether you are after a current account, a savings account or even looking for a mortgage, Nationwide has a range of great products that could help you, no matter the situation.