It’s been a terrific year to invest in Bitcoin and gold, UK shares not so much. While Bitcoin has shot up to almost $12,000 a virtual coin, and gold has hit an all-time high of $2,000 an ounce, the FTSE 100 is down about 20%.
The pandemic is to blame, obviously. Investors dumped UK shares during the stock market crash in March, as the world went into lockdown. Gold was the inevitable beneficiary. It has been seen as a store of value for around 4,000 years. Bitcoin is also establishing its claim to be a safe haven in times of trouble, too.
Yet I wouldn’t buy gold and Bitcoin today. I prefer to buy assets when their prices are down in the dumps, rather than high and flying. There are some great bargains in UK shares today. Provided you aim to hold for the long term, you can then sit tight and wait for the recovery to kick in.
The FTSE 100 has fallen
History shows that UK shares always recover from a stock market correction, if you give them enough time. If you buy today, you can get them at a big discount. Many FTSE 100 stocks are down by a third or even a half this year, despite the recovery. If you buy them in ISA, all your income and capital gains will be free of tax.
I would choose my targets carefully, though. Some sectors of the economy are too uncertain, such as any business linked to the travel industry, or bricks and mortar retail. I would prefer to focus my firepower on companies that can power on, even if we get a second lockdown in the autumn.
Although my portfolio is mostly made up of UK shares, I do not rule out holding other asset classes as well. Putting around 5% or so of your portfolio in gold is a wise idea. The precious metal tends to rise when markets fall (and the other way around), which smooths out your returns.
I’d buy UK shares first and foremost
I would also consider holding a handful of Bitcoin, too. Although no one has found a genuine killer use for it, the crypto looks like it may be here to stay. As total supply is limited, the price could rise over time. Remember that neither gold nor Bitcoin pay you income, as UK shares do, in the shape of dividends.
Despite these warm words, I wouldn’t buy gold or Bitcoin today. I think they are too expensive, and could fall back when the economy picks up. I would rather buy them when they are cheap. That’s why I’m targeting UK shares. They have taken a beating this year. Investor sentiment is low. We do not know when the recovery will come.
Such negativity is a great opportunity for long-term investors. It means you can pick up UK shares at cheap prices. If you aim to hold for a minimum five or 10 years, and ideally longer, you should reap the benefits from the recovery.
If gold and Bitcoin have fallen by then, that’s the time to buy them. Not today.
The post I’d hold Bitcoin, I’d hold gold, but right now I’d buy cheap UK shares in an ISA appeared first on The Motley Fool UK.
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Harvey Jones 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