Cryptocurrency vs Mutual Funds

Mutual funds provide expert management, diversification, and liquidity, whereas cryptocurrency offers the promise of significant returns, decentralization, and transparency.
Cryptocurrency vs Mutual Funds
3 min
17-December-2024

Cryptocurrencies are highly volatile, lacking the upper and lower circuits that stocks have, which can lead to severe downturns. Unlike mutual funds, which are generally considered safer and more stable, cryptocurrencies can experience dramatic price swings with no limits. In a comparison between crypto and mutual funds, mutual funds emerge as the safer choice due to their regulated nature and diversified investment approach, offering more stability for investors.

There has been an ongoing debate between Cryptocurrencies and Mutual Funds as they both offer numerous investment choices. Each of them has their own specific benefits and appeals to different types of investors. Cryptocurrency is a digital or virtual currency and investing in it involves high-risk and high-reward. It is directed by market demand and needs the investor to be tech savvy.

In contrast, mutual funds allow investors to invest in a diversified portfolio of assets that are managed by professional fund managers and is an investment instrument, where the money from various people will be pooled into investing. To understand better, this article will talk about cryptocurrency vs mutual funds, their features, advantages and disadvantages so that investors can make informed decisions.

Investment in cryptocurrency

Cryptocurrency has been a hot new asset class, piquing global investor interests everywhere. Contrary to traditional investments, Cryptocurrencies operate on a decentralised digital platform, and largely leverage upon blockchain technology as its foundation. This technology guarantees the security, transparency and immutability of transactions. This makes it attractive for investors who are tech savvy. Examples of cryptocurrencies include Bitcoin, Ethereum and Ripple, which have all significantly risen or plunged in value. Cryptocurrency is mainly popular because it promises high returns from market demand and technological advances. But remember, there is considerable risk associated with the volatility of cryptocurrencies and regulatory uncertainties, so be sure you know what you are getting into before taking an investment.

Investment in mutual funds

Mutual Funds have been an integral part of the investment portfolios of both amateur and seasoned investors. These are funds that pool money from multiple investors to buy a variety of stocks, bonds or other securities. Mutual funds are also an option for relatively low-risk investing; these involve professional fund managers and can provide a stable return. The diversification of mutual funds also serves as an efficient hedge for when certain sectors are down, but others rise. Furthermore, mutual funds are regulated by the Securities and Exchange Board of India (SEBI) leading to transparency as well as, investor protection. They strike the perfect balance for an investor looking at long-term growth, income or a balanced approach.

Cryptocurrency vs mutual funds

It is crucial to understand the fundamental differences and similarities between cryptocurrency vs mutual funds:

Aspect Cryptocurrency Mutual Funds
Nature Digital/Virtual Pooled Investment Vehicle
Regulation Unregulated Regulated by SEBI
Risk Level High Moderate
Return Potential High, volatile Steady, depends on market performance
Investment Management Decentralised Managed by professionals
Accessibility 24/7 trading Market hours trading
Liquidity High Varies (can be low for some funds)
Transparency Blockchain-based, transparent SEBI-regulated, transparent
Minimum Investment Low entry barrier Varies (can be high for some Funds)

 

Difference between cryptocurrency and mutual funds with example

There are a few differences between cryptocurrency and mutual funds which are essential to be understood in order to make an informed decision as to where to invest. The table below provides examples and key differences:

Feature Cryptocurrency Example (Bitcoin) Mutual Fund Example (Equity Fund)
Value Determination Market demand and supply Performance of underlying assets
Volatility High; can fluctuate wildly in short time Moderate; generally stable over long term
Regulation None; highly speculative SEBI-regulated; lower risk
Investment Management Self-managed; investor trades directly Professionally managed; fund manager handles
Accessibility Available 24/7 Limited to market hours
Return Potential Very high; risky Steady; lower risk
Example Investment Buying 1 Bitcoin Investing in an equity mutual fund
Liquidity High; easily tradable Varies; depends on fund type
Security Blockchain security SEBI regulations and fund management
Minimum Investment Can be very low Varies; often higher than cryptocurrencies

 

Features of Cryptocurrency

Makes use of blockchain technology

Blockchain-technology is the paper and ink that makes cryptocurrencies possible, as it works to record all transactions in a decentralised ledger. This helps in maintaining the amount of security and transparency required such that fraudulent activities be kept at its minimum level.

Its value is dependent on demand

The value of cryptocurrencies is determined by market demand. Price changes are often influenced by speculative interest, investor media hype and increased exposure in markets.

It can only be traded

Most of the trading with cryptocurrencies happens via digital exchanges. They are not designed for everyday transactions. Unlike traditional currencies, they cannot be held or spent in physical form.

It is unregulated

Most cryptocurrencies are completely unregulated. This unregulated nature also leads to them being highly volatile and risky for investors who might not make their money back.

Features of Mutual Funds

Regulated by SEBI

Mutual funds are regulated by the Regulating body of India namely, Securities and Exchange Board of India (SEBI). This ensures that investment objectives of investors are protected and the whole machinery acts within legalities.

Diversification

Diversification is through investing across a wide range of securities through Mutual funds. This spreads your risk and takes away the impact of a poor performance on any single investment.

Two ways of investing

There are two ways in which an investor may invest, via Systematic Investment Plan (SIP) or lump sum investments. SIPs are periodic small investments, whereas in lump sum, you invest a large chunk of money at one go.

Professionally managed

Professional fund managers who are experts in their fields manage mutual funds, and invest money after doing a detailed study and analysis of the market.

Which one to choose - Cryptocurrency vs mutual funds

Selecting between cryptocurrency and mutual funds varies on the basis of an individual's investment goals, risk appetite, and time frame. While cryptocurrencies have enormous profit potential, they are also risky due to their volatility and a total lack of regulation.

On the flip side, mutual funds offer a more secure and controlled method of investing with professional management and diversification, reducing risk considerably. These are meant for investors who desire long term growth but not at the cost of doing any harm to their risk and return balance. Mutual funds are also available to investors who seek a hands on approach with their investments outsourced to fund managers, making them responsible investments.

One thing you have to do with cryptocurrency or mutual funds is to evaluate your economic goals, risk appetite and investment knowledge. A good strategy to balance your risk and return is by diversifying both asset classes.

Final word

In conclusion, we can say that both cryptocurrency and mutual funds have their unique pros and cons. Understanding the difference between cryptocurrency and mutual funds is important to make the right decisions in any investment. Cryptocurrencies are cash cows, running on cutting-edge technology so your returns could be high but the risks associated with it are colossal. Whereas, mutual funds, regulated by SEBI are safer and more diversified investment opportunities, managed professionally.

For investors, who wish to step into the Mutual Fund investing world, Bajaj Finserv offers an avenue with various tools like comparing mutual funds and calculators. Your portfolio is also professionally managed and diversified as per your financial goals.

Essential tools for all mutual fund investors

Mutual Fund Calculator

Lumpsum Calculator

Systematic Investment Plan Calculator

Step Up SIP Calculator

SBI SIP Calculator

HDFC SIP Calculator

Axis Bank SIP Calculator

ICICI SIP Calculator

Nippon India SIP Calculator

ABSL SIP Calculator

Groww SIP Calculator

LIC SIP Calculator

Frequently asked questions

Which is better, crypto or mutual funds?
This is based on your risk tolerance and financial goal. While cryptocurrencies can give higher returns, there is also a high probability that you end up losing your investment as they are highly volatile. In the case of mutual funds, although they provide less return, the risk involved when compared to the former tends to be lesser.

Which is better to invest stocks or cryptocurrency?
Both have their set of advantages and disadvantages. Stocks are companies that one owns and therefore must obviously follow all regulations. Cryptocurrencies provide a much higher rate of return but also a very high level risk along with it.

Is it wise to invest in cryptocurrency?
If you understand technology well and have a high-risk appetite then investing in Cryptocurrency is best suited for you. Do be aware of the volatility of the markets and lack of regulations though.

Which is better crypto or index funds?
Index funds usually take the form of mutual or exchange-traded funds. They are low-risk and yield a stable investment on average by following an index, whereas cryptocurrencies can provide high-yield returns but often come with risks.

Is it worth buying crypto?
Crypto is a definite buy if you are willing to take high risk for possibly high rewards. Knowing what is going on in the market and studying the regulations are key.

Is cryptocurrency the future of money?
The promise of cryptocurrency to upend the entire financial system may still be years away, and it might never come if regulation and stability are not achieved.

Is crypto beneficial or not?
Cryptocurrency is a high return and high risk as well. If you have decided to take a high risk, then you should consider carefully whether you can secure your investment position or not before investing in Cryptocurrencies.

By using Bajaj Finserv's platform, investors can explore mutual funds, which is a safer mode of investment. It comes with expert management and diversified portfolios that help you make an informed decision to balance risk and return effectively.

Show More Show Less

Bajaj Finserv app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-approved limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.