Investment

Bitcoin vs. the S&P 500: Which Is the Better First Investment? – Waco Tribune-Herald

Published

3 years ago

February 12, 2022

Harry Miller

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(Stefon Walters)

One of the first problems new investors run into is where they should invest. With thousands of publicly traded companies, there’s no shortage of companies to choose from, and with the emergence of cryptocurrencies over the last decade, the options have expanded even more.

Between the S&P 500 and Bitcoin (CRYPTO: BTC), here’s what I think is the better first investment.

Image source: Getty Images.

How the S&P 500 works

The S&P 500 is an index that consists of the 500 largest companies in the U.S. by market cap. S&P 500 index funds are funds put together to mirror the index, and different brokerages put together their own funds. If you want to invest in an S&P 500 fund, you have multiple options, such as the Vanguard S&P 500 ETF, SPDR S&P 500 ETF Trust, iShares Core S&P 500 ETF, and more.

The companies in the S&P 500 cover almost every industry you can think of, making it ideal because it gives investors instant diversification. Instead of having to invest in individual companies in varying industries one by one — and increasing your risk of making a bad investment — you can just invest into an S&P 500 fund and be instantly invested in top players in respective industries.

The emergence of Bitcoin

Bitcoin is a cryptocurrency that was released in 2009 that has since gone on to be the world’s most popular and biggest cryptocurrency by market cap. Bitcoin was revolutionary because it was the first decentralized currency, meaning no central power (like the Federal Reserve) controlled it.

As of February 9, 2022, Bitcoin’s price has increased by over 13,570% since its inception, making it one of the most lucrative investments of all time in any asset. Unfortunately, those historical gains don’t automatically mean investors can expect similar increases in the future.

Why I’d choose the S&P 500 over Bitcoin as a first investment

If you’re just beginning to invest, one of the last things you’ll likely want to do while you’re still learning and getting used to how markets work is to put your money into an investment that will inevitably experience extreme volatility. By no means is the stock market exempt from volatility, but the S&P 500 has shown to be a lot more stable in the long run.

Another aspect of investing that you’ll miss out on if you choose Bitcoin over the S&P 500 is dividends. Along with an increase in asset price, dividends are the other primary way investors make money from their investments. If you invest a set amount into Bitcoin and the price doesn’t increase, you don’t make any money. If you invest a set amount into the S&P 500 and the price doesn’t increase, you should still make money from dividend payouts.

In 2021, the Vanguard S&P 500 ETF had a 1.59% dividend yield. If that dividend yield stayed the same and you invested $10,000 into the fund without ever contributing another dollar, you would’ve earned over $3,700 in dividends over 20 years — even if the fund’s stock price didn’t increase. Being paid for simply holding an investment is not a perk you currently get with Bitcoin.

Diversification is key

While an S&P 500 fund is one investment, the multiple assets within it ensure you’re able to reap the benefits of many different companies and industries. One of the pillars of investing is diversification; while the potential upside of Bitcoin may be enticing, you never want all your money in a single asset. Using dollar-cost averaging and making consistent investments in the S&P 500 is one of the best things you can do to accomplish your long-term goals.

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Stefon Walters owns Vanguard S&P 500 ETF. The Motley Fool owns and recommends Bitcoin and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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