Inflation is high, so the money in your bank account is falling steadily. But a friend of yours knows someone who has made tons of money on crypto. And in a YouTube ad, an influencer says he can live a luxurious life as a ‘digital nomad’ because he makes big profits on day trading in the stock market. So maybe you also want to invest in cryptocurrencies or stocks. Then you need to know something about risks, opportunity diversification and legal protection, because these differ a lot on the stock exchange and in Bitcoin. You can read about this in this article.
Radar asks questions about stocks and crypto to asset manager and stock commentator Jim Tehupuring and to Iris Newman, who as a ‘finfluencer’ shares tips on finance online.
Long-term vs. short-term returns
Tehupuring believes that investing in cryptocurrencies falls under speculation: making money fast on a price increase. ‘If you invest in stocks, you are to invest in companies you believe in and long-term growth, ”he says. ‘If you want to make money very quickly, it may go well for a while, but in the end it often ends in tears.’ Newman partially agrees with the proviso that it is also possible to speculate with stocks.
You are not legally protected when investing in crypto
It is good to know that there is no oversight of crypto companies. For example, there are no crypto-advertising laws at all, as there are for other financial products. There is also no control over who can create a cryptocurrency – Radar showed by making its own ‘token’.
More importantly, crypto-trading platforms are not monitored by a regulator while the traditional stock exchange is monitored. The Supervisor of the Dutch Financial Markets Authority and De Nederlandsche Bank (DNB) deal with, among others, banks and stockbrokers, not crypto brokers.
Registration of crypto brokers
Some crypto brokers are registered at DNB. This does not mean that DNB supervises them, it simply means that these companies have provided a list of basic data: They must explain to DNB who runs the company, how the company is managed and what the business model is. Many international crypto brokers do not even comply with this registration. For example, users of the popular trading platform Binance recently lost the ability to deposit with iDeal or with SEPA transfers because the company has no registration.
Box 3: your shares and cryptocurrencies with the tax return
You are required to enter all your assets with your tax return, in the so-called ‘Box 3’. Both equities and cryptocurrencies fall into that category. Stockbrokers, however, provide you with a standard financial statement that you can use for your tax return. Your stocks and other traditional investment products are often even filled out with your tax return because the IRS has access to your portfolio. The tax authorities cannot (yet) see your crypto assets, and crypto brokers often do not send you an annual statement. Tehupuring tells, for example, that his crypto broker sent him a message with the message: you need to know what your cryptocurrencies are worth on January 1st, and we will not make an overview for you, so make a screenshot of your crypto portfolio on January 1st.
Sign up as a beginner?
For small investors, ‘fund investing’ is a good option, says Tehupuring. You do not buy individual shares (which can be very expensive), but you put money in a kind of basket of shares through a bank or other bank. That way, you can still participate in the stock market for small amounts, for example 50 euros a month. Newman discourages beginners from investing in cryptocurrencies. “I would start with ordinary equity investing,” she says, also pointing to fund investing as a good way to get in.