Crypto vs Stocks: What's the Difference?
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Both can make you money. Both can lose you money. But they work very differently. Here's what you need to know.
Step 1
What Do You Actually Own?
Stocks
When you buy stock, you own a tiny piece of a company. You might get:
- Voting rights on company decisions
- Dividends (share of profits)
- Value tied to company performance
Crypto
When you buy crypto, you own a digital asset. Depending on the type:
- Bitcoin - Digital money/store of value
- Ethereum - Access to a decentralized platform
- Tokens - May give governance rights or utility
Key Difference
Stocks give you ownership in productive businesses. Most crypto is speculative and doesn't represent company ownership.
Step 2
How Trading Works
| Feature | Stocks | Crypto |
|---|---|---|
| Trading Hours | 9:30am-4pm ET (weekdays) | 24/7/365 |
| Minimum Buy | $1+ (fractional shares) | $1+ (any amount) |
| Settlement | T+2 (two business days) | Minutes to hours |
| Custody | Held by broker | You can hold yourself |
| Withdrawals | Cash to bank (1-3 days) | To your wallet (instant) |
24/7 Trading = Exhausting
Crypto never sleeps. Price can crash while you're sleeping. This is why long-term holding beats constant trading for most people.
Step 3
Risk Comparison
Volatility (Price Swings)
- S&P 500 - Average annual volatility ~15%
- Bitcoin - Average annual volatility ~60-80%
- Altcoins - Can swing 20-50% in a single day
Regulatory Protection
| Protection | Stocks | Crypto |
|---|---|---|
| Insurance | SIPC up to $500K | Usually none |
| Regulation | Heavy (SEC) | Still evolving |
| Fraud Protection | Strong | Limited |
Crypto Risks Are Real
- Exchanges can get hacked or go bankrupt
- You can lose everything if you lose your keys
- Scams are everywhere - projects can go to zero overnight
- No bailouts or insurance in most cases
Step 4
Building Your Strategy
Most financial advisors suggest:
The 5% Rule
Many experts suggest keeping crypto at 5% or less of your total investment portfolio. This lets you participate in potential upside while limiting downside risk.
A Balanced Approach:
- Emergency fund first - 3-6 months expenses in cash
- Retirement accounts - Max out 401k match, consider IRA
- Index funds - Low-cost diversification (S&P 500, Total Market)
- Then crypto - With money you can afford to lose
Summary Table:
| Best For | Choose Stocks | Choose Crypto |
|---|---|---|
| Goal | Long-term wealth building | High-risk/high-reward speculation |
| Risk Tolerance | Moderate | High |
| Time Horizon | 10+ years ideal | Any (but long-term reduces risk) |