Crypto vs. Index Funds: What $10,000 Invested in Each Would Look Like After 10 Years

If you have a spare $10,000, should you put it into crypto or stick with index funds? The choice depends on your risk tolerance.

If you can tolerate high volatility for high risk reward, crypto may be the way to go. But if you prefer slow and steady returns, index funds can be a good option.

But before you make any decisions, here’s how both options compare.

The case for index funds

Index funds, like those that track the S&P 500, let you own hundreds of U.S. companies. When the stock market goes up, your money also goes up. Historically, the S&P 500 has delivered an average annual return of 10.56% since 1957, according to official data. However, when adjusted for inflation, the returns fall to 6.69%.

If you invested $10,000 in an S&P 500 index fund today at an 8% annual return, that amount would grow to $21,589 after 10 years. At a 10% annual return, $10,000 could grow to $25,937. So after 10 years, you’ll likely have between $20,000 and $25,000, depending on how the market performs.

Discover More: Self-Made Millionaire Suggests 5 Stocks You Should Never Sell

Try this: 6 secure accounts capable of growing your money 13 times faster

Although the returns may seem minimal, index funds are an ideal choice for you if you want:

• Diversification: You are investing in hundreds of companies simultaneously.
• Less cost: Expense ratios are lower than actively managed funds.
• passive income: You don’t have to choose individual stocks.
• Time-Tested Returns: The S&P 500 has averaged about 10% for nearly a century.

case for crypto

Now let’s talk about cryptocurrency. Bitcoin, the largest cryptocurrency by market cap, has delivered astonishing historical returns. Over the past 10 years, it has averaged about 49% annually. This is far ahead of any traditional asset class. But it is one of the most volatile investments you can make.

Here are some scenarios based on different annual returns:

This means your $10,000 could be worth anywhere between $60,000 and $570,000 if the crypto continues to grow at the same pace it has in the past.

However, crypto returns come with extreme volatility. Bitcoin has fallen by more than 70% in the last five years and has had many ups and downs. In addition to volatility, cryptocurrencies are prone to speculation, regulation changes, and market sentiment.

While the upside can be life-changing, the downside can be brutal. You could easily see your $10,000 investment cut in half or double.

crypto vs index funds

If you are looking for stable, compounding money, index funds are the best option for you. They are ideal for long-term investors who are risk averse but want to build wealth over time. But if your risk appetite is high and you can tolerate extreme volatility, crypto could be the option. In both cases, make sure you invest what you are willing to lose, as no one can predict the market correctly.

More from GOBankingRates

This article originally appeared on GOBankingRates.com: Crypto vs. index funds: What $10,000 invested in each would look like after 10 years

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Reflect the views of.