Stock vs. Crypto on Robinhood: Which Should You Buy First?

# Stock vs. Crypto on Robinhood: Which Should You Buy First?

—

When you first open your Robinhood account and look at the home screen, you’re presented with a choice that previous generations of investors never had: you can buy fractional shares of Apple, or you can buy Bitcoin. In the same app. With the same account.

It’s a genuinely novel situation. Stocks have been around for centuries. Cryptocurrency has existed since 2009. And for the first time, the average person can access both through the same three-tap purchase flow.

But that accessibility creates a real question for new investors: **which do you buy first?**

This isn’t a rhetorical question with an obvious answer. Stocks and crypto have meaningfully different risk profiles, return characteristics, time horizons, tax implications, and roles in a portfolio. Choosing without understanding those differences isn’t investing — it’s gambling with an interface that looks like investing.

This guide breaks it all down honestly: what each asset class actually is, how they’ve performed historically, how taxes work for each, and how to think about building a portfolio that includes both.

—

## What You’re Actually Buying

### When You Buy a Stock

A share of stock represents **fractional ownership of a company**. When you buy Apple stock, you own a tiny piece of Apple Inc. — its offices, its intellectual property, its current cash flows, and its future earnings potential.

This ownership grants you:
– **Proportional participation in growth** — if Apple becomes more valuable, your shares increase in value
– **Dividends** (for dividend-paying stocks) — a share of the company’s profits paid to shareholders
– **Voting rights** — in theory, though one retail share’s voting weight is minuscule
– **A claim on assets** — in bankruptcy proceedings, shareholders receive what’s left after creditors are paid (usually nothing)

Stocks are backed by the underlying business. Their long-term value is tied to the company’s revenue, profit, growth, and competitive position. There’s an objective financial anchor.

### When You Buy Crypto

Cryptocurrency is **not ownership in a company**. Bitcoin, Ethereum, Solana — these are digital assets with no underlying business generating revenue.

What gives crypto value is more complex:
– **Bitcoin:** Value derived from scarcity (21 million total supply), decentralization, security of the network, and adoption as a store of value or medium of exchange
– **Ethereum:** Value derived from its role as infrastructure for smart contracts, DeFi, and NFTs — essentially a “platform” for decentralized applications that derives value from usage
– **Other altcoins:** Value propositions vary widely; many are speculative

Crypto is peer-to-peer digital money / programmable financial infrastructure. Its value comes from network effects, adoption, and belief in the technology — not from cash flows or profits.

This distinction matters for how you evaluate each investment. You can analyze a stock with traditional metrics (P/E ratio, revenue growth, profit margins). Crypto requires a different analytical framework entirely.

—

## Historical Performance: The Honest Numbers

### Stocks (S&P 500)

The S&P 500 — the benchmark index for U.S. large-cap stocks — has delivered approximately **10% average annual returns** over the past century, or roughly **7% after inflation**.

This isn’t guaranteed. There have been decades (2000-2010) where the S&P 500 returned nearly 0% over the full period. There have been years of devastating losses (-38% in 2008). But over long periods (20+ years), the U.S. stock market has reliably rewarded patient investors.

Key characteristics:
– Returns are relatively predictable over long horizons
– Volatility is manageable (20-30% annual drawdowns in bad years)
– Dividends provide income in addition to appreciation
– Regulatory framework is mature and understood

### Crypto

Crypto’s historical performance is more extreme in both directions:

| Asset | 2020 Return | 2021 Return | 2022 Return | 2023 Return | 2024 Return |
|——-|————-|————-|————-|————-|————-|
| Bitcoin (BTC) | +302% | +60% | -65% | +157% | +120% |
| Ethereum (ETH) | +470% | +400% | -68% | +91% | +46% |
| S&P 500 | +18% | +27% | -19% | +24% | +23% |

The pattern is clear: crypto delivers dramatically higher returns during bull markets and dramatically deeper losses during bear markets. A 2021 investor who held all year saw gains most stock investors can’t imagine. A 2022 investor who bought in January and panicked out in November locked in losses of 65%+.

**For Bitcoin specifically:** An investor who bought in January 2020 ($7,200) and held to January 2025 (~$45,000) made approximately 6x their money — far outperforming the S&P 500 over the same period.

**Caveat:** Past performance doesn’t guarantee future returns, and this is especially true for crypto, where the asset class is young and the performance data covers fewer market cycles than stocks.

—

## Risk Profile: How Much Can You Actually Lose?

### Stock Risk

**Worst case for a diversified portfolio:** The U.S. stock market fell 57% from peak to trough during the 2008-2009 financial crisis. A $10,000 S&P 500 investment in October 2007 was worth approximately $4,300 at the 2009 bottom.

**Recovery:** That same investment recovered fully by 2013 and was worth ~$35,000 by 2025. Time healed the wound.

**Individual stocks:** Much riskier. Single companies can go bankrupt (Enron, Lehman Brothers, Kodak). A diversified portfolio reduces but doesn’t eliminate this risk.

**Key insight:** For diversified stock investors with long time horizons, permanent capital loss is rare. Market crashes historically recover.

### Crypto Risk

**Worst case for Bitcoin:** Multiple 70-80%+ drawdowns in its history. A $10,000 Bitcoin investment at the 2021 peak (~$69,000) was worth approximately $2,600 at the 2022 bottom — a loss of 73%.

**Recovery:** Bitcoin did recover from previous crashes (2018 bear market: -84% from peak, followed by new all-time highs in 2021). But each recovery took 2-4 years.

**Altcoin risk:** Many altcoins from the 2017 and 2021 bull markets never recovered. Tokens can go to zero. The failure rate for individual cryptocurrencies is high.

**Regulatory risk:** Governments can and do impose crypto regulations that impact prices (China’s mining bans, SEC enforcement actions). This is a risk that stocks, by their nature, face much less acutely.

**Key insight:** Crypto is genuinely riskier than stocks. The volatility is higher. The downside is steeper. And the asset class is young enough that permanent loss scenarios — while unlikely for Bitcoin specifically — are more plausible than for diversified stock holdings.

—

## Tax Implications: The Critical Difference

This section matters more than most beginners realize.

### Stocks: Tax Treatment

**Long-term capital gains (held 12+ months):** 0%, 15%, or 20% depending on your income. Most people pay 15%.

**Short-term capital gains (held <12 months):** Taxed as ordinary income (10-37%). **Dividends:** Qualified dividends taxed at long-term capital gains rates. Non-qualified at ordinary rates. **Tax-loss harvesting:** You can sell losing stock positions to offset gains, reducing your tax bill. This is a legitimate and widely used strategy. **IRA optimization:** Stock gains inside a Roth IRA are tax-free. This is a massive long-term advantage for stock investors who use tax-advantaged accounts. ### Crypto: Tax Treatment The IRS treats cryptocurrency as **property**, not currency. Every transaction is a taxable event: - **Selling crypto for USD:** Capital gains tax (short or long-term based on hold period) - **Trading one crypto for another:** Taxable event (even if you never touch USD) - **Buying something with crypto:** Taxable event - **Receiving crypto as income:** Ordinary income tax at time of receipt **The complexity problem:** Every purchase creates a tax lot. If you bought Bitcoin 10 times throughout the year and sold some of it, you have to track which lots you sold and calculate gains/losses for each. Robinhood generates a 1099 for crypto transactions, but the complexity escalates quickly if you're active. **No crypto IRAs on Robinhood:** Robinhood's IRA accounts currently only support stocks and ETFs. To hold crypto in a tax-advantaged account, you'd need a specialty crypto IRA (through other providers) or use Bitcoin ETFs like IBIT (which can be held in an IRA but don't give you actual Bitcoin). **Key insight:** Stocks, especially held long-term in a Roth IRA, have a significant tax advantage over crypto. This structural difference should factor into your allocation decision. --- ## Liquidity and Market Hours ### Stocks - Trade during market hours: Monday–Friday, 9:30am–4:00pm ET - Robinhood Gold adds extended hours: 7am–8pm ET, plus overnight trading - Fractional shares settle T+1 (next business day) - Highly liquid — major stocks trade billions of dollars daily ### Crypto - Trade 24/7/365 on Robinhood — no market hours - Prices can move dramatically at 3am on a Sunday - Bitcoin and Ethereum are highly liquid at major exchanges; smaller coins less so - Robinhood crypto wallet allows external withdrawals (important for self-custody advocates) **Practical implication:** Crypto's 24/7 trading can be a feature or a bug. For investors who trade emotionally, the ability to panic-sell at 2am during a market downturn is a risk. The stock market's forced closing hours inadvertently protect investors from impulsive decisions. --- ## Portfolio Strategy: How to Hold Both Most experienced investors who hold crypto don't put their entire portfolio into it. The typical recommendation in financial planning circles is a **satellite position approach**: ### The Core-Satellite Model **Core (80-90%):** Stocks and ETFs — the foundation of your wealth - Broad market ETFs (VTI, VOO) for passive, diversified exposure - Individual stock positions in companies you believe in - IRA allocations for tax-advantaged growth **Satellite (10-20%):** Higher-risk, higher-potential positions - Crypto: Bitcoin (BTC) and/or Ethereum (ETH) as primary holdings - Small-cap growth stocks, sector bets, speculative plays This structure gives your portfolio stability through the diversified core while allowing meaningful crypto exposure that can outperform when crypto cycles are bullish. ### Sample Allocation by Risk Tolerance **Conservative investor (just getting started):** - 90% stocks/ETFs (VTI, SPY, or similar) - 10% crypto (Bitcoin only or 70% BTC / 30% ETH) **Moderate investor (comfortable with volatility):** - 75% stocks/ETFs - 15% crypto (BTC + ETH primarily) - 10% individual growth stocks **Aggressive investor (long time horizon, stomach for volatility):** - 60% stocks/ETFs - 25% crypto (BTC, ETH, and select Layer 1 altcoins) - 15% speculative individual stocks None of these allocations are right or wrong in absolute terms. The "right" allocation is the one you can stick with through a 60% crypto drawdown without panic-selling. --- ## Which Should You Buy First? The Actual Answer Here's the honest answer: **start with stocks, then add crypto.** Here's why: **1. Stocks give you investing fundamentals first.** Understanding earnings reports, P/E ratios, dividends, and company research is a skill that transfers to crypto analysis. Learning to invest with stocks first builds the discipline and analytical habits that make you a better crypto investor later. **2. The tax-advantaged accounts favor stocks.** Your Roth IRA contribution match (1-3% on Robinhood) and tax-free growth are among the best financial tools available. These advantages only exist for stocks, not crypto. Maximize them first. **3. Stocks provide a stable foundation while crypto is volatile.** A 50% crypto drawdown is emotionally brutal when crypto is your only investment. The same drawdown on 15% of a diversified portfolio is painful but manageable. Build the foundation, then add crypto. **4. Start crypto with Bitcoin before anything else.** If and when you add crypto, start with Bitcoin (BTC). It has the longest track record, the highest liquidity, the most institutional adoption, and the clearest value proposition (digital scarcity / store of value). Ethereum is a reasonable second addition. Most altcoins should come much later, if at all. **The practical beginner path:** 1. Open Robinhood → fund account → buy S&P 500 ETF (VOO or VTI) 2. Set up recurring monthly investment in that ETF 3. Open IRA → start contributing → collect the match 4. Once stocks portfolio is established, allocate 5-10% to Bitcoin 5. Hold Bitcoin through volatility (don't trade it frequently — the tax complexity isn't worth it) 6. Expand crypto allocation only after you've survived a bear market with it **[→ Open your Robinhood account and start building your portfolio](https://join.robinhood.com/ryans3465/ec_referral_v1)** --- ## Robinhood's Crypto Offering: What's Available As of 2025, Robinhood offers crypto trading in: - Bitcoin (BTC) - Ethereum (ETH) - Dogecoin (DOGE) - Litecoin (LTC) - Solana (SOL) - Avalanche (AVAX) - Cardano (ADA) - Chainlink (LINK) - Shiba Inu (SHIB) - Polygon (MATIC) - Compound (COMP) - Uniswap (UNI) - And several others **Robinhood crypto fees:** $0 commission (Robinhood earns on the spread between buy and sell prices, typically 0-2%). **Robinhood crypto wallet:** Since 2023, Robinhood allows users to withdraw Bitcoin, Ethereum, and some other supported coins to external wallets. This is important for investors who prefer self-custody — keeping crypto in a hardware wallet they control rather than on an exchange. For more detailed analysis of Bitcoin investing strategy and crypto market cycles, see our companion articles on the Cryptoryancy blog: - [Understanding Bitcoin Market Cycles] - [How to Analyze Crypto Before You Buy] - [Bitcoin vs. Ethereum: Which Should You Buy?] --- ## Dollar-Cost Averaging Into Both Asset Classes One framework that works well for both stocks and crypto is **dollar-cost averaging (DCA)** — investing a fixed dollar amount on a regular schedule regardless of price. **Why DCA works for stocks:** Removes the temptation to time the market. Automatically buys more shares when prices are low and fewer when prices are high. Decades of evidence support it as a superior strategy for most retail investors vs. lump-sum timing. **Why DCA works especially well for crypto:** Crypto's volatility is extreme. Trying to buy Bitcoin at the "right" price has humbled professional traders. DCA removes the timing problem entirely — you buy consistently and your average cost naturally smooths across highs and lows. **Robinhood's recurring investment feature** makes this easy for both asset classes: - Set up weekly or monthly recurring buys in your S&P 500 ETF - Set up a separate weekly or monthly recurring buy in Bitcoin - Both auto-execute — you don't have to think about market conditions A simple setup: $75/week into VOO (S&P 500 ETF) + $25/week into Bitcoin. $100/week total. $5,200/year compounding across two asset classes with zero active management required. This is arguably the most powerful and lowest-effort investing strategy available to retail investors in 2025. Robinhood's interface makes it accessible to anyone. --- ## Common Mistakes When Mixing Stocks and Crypto **Treating crypto gains as "house money"** After a crypto bull run, some investors treat their profits as free money to gamble with. It's not. Crypto gains are taxable. And markets give back what they gave fast. **Panic-selling crypto during drawdowns** The investors who turned crypto into generational wealth bought and held through multiple 70%+ drawdowns. The ones who lost money panic-sold at the bottom and bought back in at the top. **Ignoring the tax implications of frequent crypto trading** Every crypto-to-crypto swap is a taxable event. If you're actively trading crypto, you're generating complex tax documentation and potentially triggering short-term gains (taxed as ordinary income). For most retail investors, a buy-and-hold approach with Bitcoin and Ethereum is both simpler and more tax-efficient than active trading. **Overallocating to crypto based on recency bias** If you first heard about crypto during a bull market, your perception of "normal" returns is distorted. Crypto's 80% drawdowns are equally real as its 10x bull runs. **Neglecting stocks because crypto is "more exciting"** The psychological thrill of crypto volatility can make the steady 10%/year returns of the stock market feel boring. This is a trap. Boring compounds. Boring wins over decades. --- ## The Bottom Line Stocks and crypto are not competitors for your investment dollars — they're complements with different roles in a well-designed portfolio. **Stocks:** The foundation. Steady, tax-advantageous, backed by businesses with real earnings. Best in IRAs. Best held for decades. **Crypto:** The satellite. High risk, high potential reward, 24/7 volatility. Best held in small allocations you can survive losing 70% of temporarily. Robinhood makes holding both in one account genuinely easy — and that's actually one of its most underrated features. The ability to see your Apple stock, your S&P 500 ETF, and your Bitcoin position in the same portfolio view simplifies portfolio management considerably. Start with stocks. Add crypto once your foundation is built. Hold both through volatility. Reinvest dividends. Maximize your IRA. That's not flashy. But it's the path that actually builds wealth. **[→ Build your stock and crypto portfolio on Robinhood today](https://join.robinhood.com/ryans3465/ec_referral_v1)** --- ## Frequently Asked Questions **Is crypto better than stocks for beginners?** Stocks are generally better for beginners. They're backed by real businesses, have longer track records, and offer tax-advantaged account options. Add crypto after you understand basic stock investing. **Can I hold stocks and crypto in the same Robinhood account?** Yes. Robinhood lets you hold U.S. stocks, ETFs, options, and 15+ cryptocurrencies in a single account. Your entire portfolio is visible in one interface. **Are crypto gains taxed differently than stock gains?** The same capital gains tax rates apply (0/15/20% for long-term, ordinary income for short-term). However, every crypto trade — including crypto-to-crypto swaps — is a taxable event. Stocks in an IRA can avoid these taxes entirely; Robinhood's IRA only holds stocks, not crypto. **Should I put crypto in my Robinhood IRA?** Robinhood IRAs currently only support stocks and ETFs. You can hold Bitcoin ETFs (like IBIT) in your IRA to gain crypto exposure with tax advantages, but you can't hold actual Bitcoin in a Robinhood IRA. **What percentage of my portfolio should be in crypto?** Most financial planners suggest 5-15% for investors who want crypto exposure. The right number is the amount you could watch drop 70% without panic-selling. **Is Bitcoin or Ethereum better?** Bitcoin has a longer track record and clearer value proposition as digital scarcity. Ethereum has more use cases (DeFi, NFTs, smart contracts) but more complexity and competition. Most investors start with Bitcoin and add Ethereum second. --- *Related articles:* - *[Robinhood Review 2025: Complete Platform Guide]* - *[How to Invest $100 on Robinhood: Beginner's Guide]* - *[Robinhood Fractional Shares Explained]* - *[Bitcoin vs. Ethereum: Which Crypto Should You Buy First?]* - *[Understanding Crypto Market Cycles: Bull Markets, Bear Markets, and Halvings]*