Key Points
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Cryptocurrencies are still a relatively new development in the financial markets.
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Gold lacks growth opportunities, which is why streaming and royalty companies are likely a better choice.
Wall Street has a long history of moving in lemming-like fashion as hot investment ideas gain traction. Cryptocurrencies have attracted significant attention as an alternative to more traditional stores of wealth, such as gold. If you are looking at either of these investments, you might want to consider a third choice: Streaming and royalty stocks.
Dip your toe in Crypto, so you don’t end up belly flopping
If you are interested in cryptocurrencies, it probably makes sense to tread with caution. For starters, that means putting only a small amount of money into the space, and only into the largest cryptocurrency. Notably, the price of Bitcoin (CRYPTO: BTC), the one most investors should likely stick with, has slumped over the past year even as gold has continued to rise. That’s a sign that Bitcoin may not turn out to be the safe haven investment that many had hoped. Caution is warranted.
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A hand placing piles of coins on a grid.
Image source: Getty Images.
Gold has its problems, too
Gold has a longer history as a store of wealth and appears to be playing the role again at a time when many are worried about the economy and geopolitical conflict. However, gold has its own limitations. Notably, an ounce of gold will only ever be an ounce of gold. It can’t grow into something more, which is why it, too, should probably only be a small portion of your portfolio.
A better option for most long-term investors will be royalty and streaming companies like Franco-Nevada (NYSE: FNV), Royal Gold (NASDAQ: RGLD), and Wheaton Precious Metals (NYSE: WPM). Basically, all three of these companies give precious metals miners cash up front for the right to buy gold and other metals at advantageous prices in the future.
The miners use the money to build mines, make acquisitions, and strengthen their balance sheets without taking on debt or selling stock. In turn, Franco-Nevada, Royal Gold, and Wheaton can buy gold at a discount to spot prices, effectively locking in profits. And since they basically just own precious metals, their stock prices are highly tied to those metals.
The ability to grow is the big streaming and royalty story
That said, the big plus is that Franco-Nevada, Royal Gold, and Wheaton can grow their businesses by inking new streaming and royalty deals with miners. Also, all three companies pay dividends, allowing shareholders to see a direct financial benefit that you can’t get from either Bitcoin or gold.
For most, dabbling in crypto and gold isn’t a bad thing. But diving into either would probably be risky. A better option is to dabble a little while investing in streaming and royalty companies with the bulk of the money you were planning to allocate to crypto and/or gold.
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Reuben Gregg Brewer has positions in Franco-Nevada. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
