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Crypto vs forex and stocks: what’s the easiest way to make money?

These days, there’s no shortage of ways to make money through the financial markets. Yet some strategies are more effective than others. With some, the odds of making money are stacked in your favour, while with others, the odds are against you. With that in mind, I’m going to compare cryptocurrency trading to forex trading and stock market investing. What’s the easiest way to make money?

Cryptocurrency trading

There’s no doubt it’s possible to make big money on cryptocurrencies. Just look at the people who bought bitcoin (BTC) a decade ago when it was trading under $1. Many of these people are now multimillionaires.

Yet making money from crypto isn’t as easy as many people make it out to be. Digital currencies can be notoriously volatile, which means you can also lose a lot of money. For example, if you’d bought $1,000 worth of BTC in late 2017 during the cryptocurrency bubble, your investment would have been worth around $200 a year later.

Personally, I don’t think crypto trading is worth the risk. Not only are cryptocurrencies impossible to value, but regulators are cracking down on them. Overall, I see this form of trading as highly speculative.

Forex trading

Forex trading isn’t much better, in my opinion. Like crypto trading, there’s money to be made and some experts are able to trade forex for a living. However, currencies are also highly volatile (just look at the pound recently) and statistics show most people that try their hand at forex trading actually lose money. For example, according to both forex.com and forextime.com, 70% of retail investors on their platforms lose money. One reason for this is that when trading forex, you’re up against both the currency markets and the forex provider. 

So, while social media shows pictures of forex traders living glamorous lifestyles, in reality, forex trading is nothing like this. Forget the Porsche and the Rolex collection, most forex traders are losing money.

Stock investing

In my view, investing in stocks is a far easier way to make money than playing the crypto or forex markets. With stocks, all you really need to do to make money is find companies that are:

  • Growing their profits

  • Reasonably valued

If you invest in these types of companies and hold on to them for a number of years while they get bigger, there’s a good chance you’ll make money.

Take online fashion retailer Boohoo Group, for example. Five years ago, Boohoo’s net profit was around £8.4m and its share price was around 45p. Today however, Boohoo’s share price stands at 282p, as its net profit last year came in at nearly £40m. As its profit has risen, so has its share price. So, just by holding the stock for five years, you could have turned £1,000 into more than £6,000.

Of course, not every stock performs like this. And it’s important to realise you can lose money on stocks too. However, given the choice between being glued to a screen trading crypto or forex, or investing in companies as they grow their profits, the choice is a no brainer, in my opinion.

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Edward Sheldon owns shares in Boohoo Group. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.