Once you become familiar with the great financial advantage of compound interest, the contribution aspect of this strategy should be the one you should pay the most attention to. Even if your initial deposit is sizeable, and even if you find an account that pays interest way above the average rates, building true wealth will hinge upon a steady flow of funds to make your compound interest strategy more powerful.
How Investors Choose to Invest
Most compounding investors make monthly contributions to their main account from earned income, but many are known to be active investors who deposit profits whenever they realize them; to a great extent, this is how billionaire investor Warren Buffett has generated more than half of his personal wealth. Buffett is known as a conservative investor who prefers blue-chip stocks, which means he is not the kind who would consider adding cryptocurrencies such as Bitcoin and Ethereum to his Berkshire Hathaway portfolio.
The dramatic growth of Bitcoin since 2017 cannot be denied because it has considerably outpaced the stock market
Despite their volatility and controversy, the two major digital currencies have become investment commodities because this is how investors perceive them. Market volatility is what day traders thrive on, so you will find many of them in the cryptocurrency markets, but institutional investors have also been paying attention to specific tokens. The dramatic growth of Bitcoin since 2017 cannot be denied because it has considerably outpaced the stock market, and this is what piques the interest of Wall Street giants who are gradually easing into Bitcoin.
Differences in Investment Returns
The return on investment factor of Bitcoin is undeniably higher than the Dow Jones Industrial Average and the S&P 500 combined. The high volatility and low circulation of Bitcoin are detrimental, but the cryptocurrency market as a whole has been improving in terms of stability and transparency. There will come a time when digital versions of major currencies are minted by central banks, and investors will still flock to Bitcoin because of its commodity status.
In the end, investing in Bitcoin and other tokens could bring some nice diversity to your portfolio
We know that compound interest investors tend to skew conservative, but they should not ignore cryptocurrencies. Imagine the growth you could achieve by compounding Bitcoin profits by means of depositing them into your high-yield savings account. Instead of entirely dismissing digital currencies, you should find then a place where they can coexist with stocks in your investment portfolio. Even the most aggressive hedge funds do not invest more than 20% of their capital into cryptocurrencies, and you should emulate this strategic philosophy. In the end, investing in Bitcoin and other tokens could bring some nice diversity to your portfolio.