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Bitcoin rallies past $16,000! I’d stick to FTSE 100 growth stocks to aid early retirement

Jonathan Smith
·3-min read
Dice engraved with the words buy and sell, possibly in FTSE 100
Dice engraved with the words buy and sell, possibly in FTSE 100

The financial markets have been on a rollercoaster over the past couple of weeks. The FTSE 100 has been one of the winners, gaining hundreds of points in the stock market rally. Some FTSE 100 growth stocks have gained over 20% in the past week. Other assets have also risen in value. The Bitcoin price broke through $16,000 for the first time in three years.

Although some argued that cryptocurrency has a negative correlation with stocks, the recent moves don’t appear to agree with that. This is just another reason why I’m cautious about investing in Bitcoin. What role exactly does the price have? Isn’t it supposed to rally as an alternative investment (like gold) when investors are worried? If so it shouldn’t be rallying now when good news is hitting the markets. The lack of a fundamental reason to pin on the erratic moves behind Bitcoin doesn’t make it appealing to me.

Ignoring Bitcoin for FTSE 100 growth stocks

Just because I’m passing on Bitcoin doesn’t mean I’m passing on wanting to make large returns. For example, 15 different FTSE 100 companies have gained 20% or more in value this week alone. This is from a wide range of sectors as well, from finance to aviation. The benefit I find in investing in these kind of growth companies is that I can have a finger on the pulse of what’s driving the moves, and make investment decisions accordingly.

For example, take a firm that traditionally wouldn’t be considered as a growth stock. Rolls-Royce is a mature business, but events this year meant it has shrunk considerably. The news about a potentially effective vaccine saw the share price rally over 20% this week. Given the position of RR as of today, there’s large growth potential over the coming few years.

You could argue this growth is technically just to get back to the output it was at before the pandemic. This is true, but for a new investor, it can be seen as a FTSE 100 growth stock. As a result, the share price growth in coming years (dependent on the success of the vaccine) could be very high.

Enough growth for early retirement?

Growth stocks are important, but what’s the goal of accumulating high profits? For many, it’s the desire to retire early. The good news is that FTSE 100 growth stocks could help many of us out considerably in this regard.

If we ignore the short-term rally and focus on long-term performance, we could assume a growth rate of around 8%-10% per annum. If I invested £150 a week, I’d have a pot of over £110,000 after a decade of investing (at 9% returns). This sum, over a relatively short space of time, would help to pay down a mortgage, pay off debts, or simply be a fund to live off in the years before the State Pension kicks in.

I’d feel much more confident in leaving my money in FTSE 100 growth stocks for the next decade in the pursuit of profits than in Bitcoin. Historical volatility and being able to see the fundamental drivers are the main reasons.

The post Bitcoin rallies past $16,000! I’d stick to FTSE 100 growth stocks to aid early retirement appeared first on The Motley Fool UK.

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jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020