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Forget the Bitcoin price! I’d invest £20k to make a million like this

Kirsteen Mackay
·4-min read
A depiction of the cryptocurrency Bitcoin
A depiction of the cryptocurrency Bitcoin

The Bitcoin price has risen an outstanding 255% this year to breach £20k. It’s getting a lot of traction and hype. People wish they’d bought a Bitcoin and wonder is it now too late?

I can’t answer that, but to calculate the return multiple in getting from £20k to make a million, I divide the million by the initial investment. This shows a 50x return. But, for a £1m Bitcoin to be the reality, I think the world would need to be in an even worse economic state. The trouble is, even the most bullish of enthusiasts don’t foresee a £1m Bitcoin soon. Nevertheless, some of them are anticipating it reaching £100k a coin in 2021, that would be a 5x return on my £20k investment. Pretty impressive, but so very speculative too.

WATCH: What's Behind Bitcoin's Winning Run?

How I’d make a million

I prefer the reliable and less risky option of stock market investing. It’s not a quick road to riches, but real wealth is achievable without the world collapsing around us.

If I invest £20k today in a mixture of equities and funds with an effective annual interest rate of 10.3%, then in 40 years I’d make £1m. That 10.3% is achievable, but may involve more risk than I’d like. If I want to make a million at a lower interest rate, I can make regular payments instead. In the same period, I could achieve £1m at an effective annual rate of 6.5% with contributions of £350 per month on top of my initial investment. With a higher interest rate, or increased contributions, I could achieve the £1m in a quicker timescale.

Share prices make impressive gains in 5 years

Many FTSE 100 companies have made impressive gains in recent years. The following three have witnessed their share prices skyrocketing in the past half-decade with massive percentage returns.

If I’d spent £20k on 492 shares in AstraZeneca when they were around £40.57, they’d now be worth over £37k. That’s a return multiple of 1.9x, or a rise of 86%.

Alternatively, if I’d invested £20k on 8,130 shares in internet security company Avast, when they were around £2.46, they’d now be worth over £44k. That’s a return multiple of 2.2x, or a rise of 121%.

Yet again, if I’d invested £20k in 790 shares in The London Stock Exchange when they were around £25.30, they’d now be worth nearly £72k. That’s a return multiple of 3.6x, or a whopping 261% gain!

Each of these are quality FTSE 100 businesses with an edge on their competition and a position of strength. They continue to flourish and I’d consider adding them to my Stocks and Shares ISA.

Sectors to watch in 2021

Heading into 2021, there are several sectors I’m keeping an eye on. The software-as-a-service (SaaS) and cloud-based business model has been an exceptional success story of 2020. I believe this will continue as the pandemic permanently transforms our world. In a similar vein, I think cybersecurity stocks will continue to thrive. I also think healthcare stocks will continue their ascent and oil stocks will rebound once international travel resumes.

With the vaccine rollout well underway and Brexit concluded, I think there’s much to look forward to. Bitcoin may well continue to thrive and head for £100k, but I’d prefer to stick with investing in stocks. I think it’s possible to make a million through stock market investing as long as time is on my side.

The post Forget the Bitcoin price! I’d invest £20k to make a million like this appeared first on The Motley Fool UK.

WATCH: Will Interest rates stay low forever?

More reading

Kirsteen 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