Updated: Jan 30
As the old saying goes, "when one door closes, another one opens." That’s especially true for investors who are looking to get more out of their stocks and cryptocurrency investments. As more people learn about how blockchain technology can improve financial services and other industries, the number of crypto investors is on the rise. In this article, we’ll explore the benefits of community and social trading in stock and cryptocurrency investing, as well as answer some common questions you might have.
What is Community and Social Trading?
In a nutshell, community and social trading are when people from different backgrounds or investment experience trade stocks and cryptocurrencies together. This is a great way for people to get involved in financial trading and help support each other with tips, strategies, and insights. It’s also a great way to learn more about different financial markets, learn new investment strategies and how different companies interact with each other.
Why Should I Invest in Crypto?
In case you’re new to investing and just starting your journey, you might be wondering why you should invest in crypto.
First off, cryptocurrencies are still in their infancy and there is limited historical data to indicate how they will perform in the future. That means there are even fewer things to go on as an investor to justify the high price of a cryptocurrency. While we may not know exactly what kind of return cryptocurrencies will generate over time, we can make educated guesses based on the fact that they are new and haven’t been completely tested by the market.
That being said, it’s important to understand the role that cryptocurrencies play in the overall ecosystem, and why they’re such a good investment. First, let’s clear up some common misconceptions about cryptocurrencies. Bitcoin isn’t the only cryptocurrency out there. There are hundreds of Altcoins, and hundreds more are in the works.
This means that you don’t have to worry about missing out on buying bitcoin when it was cheap. There are still tons of opportunities to buy other tokens and make big profits.
What is the role of community and social trading in stock and cryptocurrency investing?
Simply put, social trading is when people trade based on their connections instead of just buying and holding stocks themselves. This is why you might see certain investment strategies based on social trading, like the buy-and-hold philosophy of passive investment funds or the crowdfunding investment strategies of cryptocurrency startups.
Since most investors don’t know the market well enough to buy and hold stocks by themselves, investors who buy and sell with other investors can learn a lot from each other. This is particularly true for investors who want to boost their returns by discussing their investments and trading strategies with other investors.
How to Trade Using Community and Social Stocks
There are a few general strategies you can use when trading social and community stocks. Look for groups of investors who are willing to trade with other members of their group. We call this "social trading."
Invest alongside people who you know have experience more than you or people with proven profitable returns in the market.
Pros and cons of community and social trading
The major advantages of community and social trading are that it encourages transparency and helps you get exposure to new markets and investment strategies that may not be available to you if you’re solely invested in stocks.
One setback of social trading is that you need to find a trading community that’s willing to support you and help you grow your investment portfolio. If you’re not involved in a trading community and your investments fall short of your expectations, you might end up feeling stuck with low returns.
But you don’t have to beat yourself over this problem because AleFi has solved that issue. They are a community that brings together traders and investors of diverse backgrounds and experience together.
Cryptocurrencies are just the tip of the iceberg when it comes to the potential applications of blockchain technology. There’s a lot more to come, and with the right strategy and investment, you can benefit from this too. That’s why you should consider investing in cryptocurrencies. While they don’t store value like stocks or real estate do, they can still give you a big return on your investment by helping to boost the overall health and value of the entire ecosystem. As more people get to know about the blockchain and understand cryptocurrency, the more demand it will get. That means there’s a lot of potential for crypto to gain value.
If you’re interested in trying out community and social trading, we recommend starting with Alefi. We make it easy for people to start their investment journey. Connect with like minded individuals, follow the "gurus" in the game, and get real-time notifications when they buy or sell.