The stunning capital returns recorded by gold and Bitcoin in 2019 could make them increasingly popular among investors. After all, they appear to have momentum that could realistically continue in the short run.
However, investors may be better off taking a long-term view of their finances through regularly purchasing undervalued FTSE 100 shares. They may not match the returns on gold and Bitcoin in the short term. But their risk/reward ratio and track record of performance suggest that they could offer a better chance of making a million compared to buying the precious metal and virtual currency.
The valuation of the FTSE 100 suggests that it offers investment appeal at the present time. Numerous sectors such as industrials, defence, retail and banking contain stocks that trade on lower valuations than their historic averages. This suggests that risks such as Brexit and the trade war between the US and China have weighed on investor sentiment, thereby providing investors with the chance to buy high-quality stocks while they trade at appealing prices.
While investing a lump sum in FTSE 100 shares could be a good long-term move, so too could regular investing. As mentioned, risks face the world economy at the present time. This could mean that the index experiences periods of volatility over the coming months that cause share prices to decline on a temporary basis.
Through regular investing, investors may be able to capitalise on the opportunities that this situation presents. And with the FTSE 100 having always recovered from its downturns to post new record highs, in the long run, the returns available from such a strategy could be high.
Investing regularly in the FTSE 100 is easier than ever. It can be undertaken via most online share-dealing providers for a minimal fee that is sometimes as low as £1.50 per trade. As such, it is very accessible to all investors.
Furthermore, investing in a tax-efficient way is a simple and cost-effective process. Opening a SIPP or a Stocks and Shares ISA is relatively uncomplicated and inexpensive. In the long run, it could lead to reduced tax being paid, which may boost your overall returns.
Clearly, investing regularly in FTSE 100 shares is unlikely to generate a seven-figure portfolio in a short space of time. However, when undertaken over the long run, it could lead to a large portfolio – especially since the FTSE 100 seems to offer excellent value for money at the present time.
Although Bitcoin and gold have enjoyed strong periods of growth, their long-term return profiles may not be as enticing as FTSE 100 stocks. Gold’s price level could be negatively impacted once investor confidence returns due to its defensive appeal, while a lack of fundamentals means that valuing Bitcoin following its recent surge is highly challenging. Therefore, investing in FTSE 100 shares could be a better means of making a million.
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Peter Stephens 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