Investing was once limited to stocks being purchased in companies. Over the years, investing has evolved to a variety of options, which include digital assets. When hearing the term “digital assets,” cryptocurrency may be the first thing that comes to mind. Investing in cryptocurrencies is exciting, but it is also possible to diversify a portfolio with other types of digital asset investments.

Cryptocurrency

Cryptocurrency is digital money that is managed using blockchain technology instead of traditional financial institutions, such as banks and credit unions.

Benefits of investing in cryptocurrency include:

Opportunity to earn a strong return on an investment
Security safeguards against fraud
Accepted internationally for payments
Increasingly recognized by financial platforms

Risks of investing in cryptocurrency include:

‌Value increases and decreases significantly from day to day
The uncertainty of how cryptocurrency will evolve in the future
‌Potential for losing money if consumers cannot access their digital wallet

Platforms

For those not interested in cryptocurrency, they may consider digital platforms.

Benefits of investing in platforms include:

More diverse than cryptocurrency because they bridge the gap for compatibility with businesses
They offer varying benefits for cryptocurrency purchases and trades

Risks of investing in platforms include:

Some of their algorithms may have a high cost, making them too expensive for many people
They may not be as decentralized as cryptocurrencies can be

Decentralized Applications

Just as cryptocurrency is a decentralized system for money, decentralized applications offer freedom from operating systems and singular authorities.

Benefits of investing in decentralized applications include:

There is no central server
Payments do not require a third party for facilitation‌
Open sources leads to more transparency
Risks of investing in decentralized applications include:
A high network load can lead to increased fees and drive away users‌
The ecosystem is constantly changing, so consumers must continue learning

Non-Fungible Tokens (NFTs)

‌NFTs are a form of digital art. Many NFTs consist of internet memes, music, and even writing elements, such as social media posts.

Benefits of Investing in Non-Fungible Tokens include:

An investment may increase in value
Consumers own something popular and unique‌‌
The ownership is digital, so it is easier to track than physical assets

Risks of Investing in Non-Fungible Tokens include:

Consumers cannot convert physical art into digital art
Ownership does not always mean that consumers own the copyright‌
Blockchain technology is arguably not environmentally friendly

Other Suggestions

Maybe consumers want to take a step toward investing in digital assets but do not want to jump in with both feet. Wealth advisors can help consumers who are considering investing in companies that are transforming the realm of digital asset investments. These companies include:

Payment gateways‌
Hardware
‌Crypto miners
‌Exchanges
‌Crypto holding companies
‌Crypto trading companies
‌Patents for digital assets and digital services‌
‌Banking and asset management

As cryptocurrency is gaining acceptance and popularity, digital asset investments are becoming more commonplace. The blockchain technology used to manage cryptocurrency opened the door for additional types of digital investments — some of which cannot be fathomed. While the technology is fairly new, digital asset investments prove to be resilient in vulnerable markets. For people with extra money to invest, digital assets are a smart venture to talk about with a wealth advisor.

Originally posted 2021-08-06 11:20:00.