2020 has been a rotten year for UK shares so far, but a great one for gold and Bitcoin. While the FTSE 100 is down around 20% since its mid-January high of 7,674, the gold price is up almost 25% to $1,920 an ounce, at time of writing. Cryptocurrency Bitcoin has done even better, soaring an incredible 58% this year.
Despite this, I would ignore both of them and aim to build my long-term wealth by investing in UK shares. I reckon today could be a good time to buy them, ahead of the next leg of the stock market recovery.
The FTSE 100 is becalmed right now. No doubt catching its breath, after a tumultuous year that saw it crash by a third to below 5,000 in March, then rebound by a fifth to today’s level of just over 6,000. Where it goes next will largely depend on how quickly we emerge from the Covid-19 pandemic.
I’d beware gold and Bitcoin
There’s also the small matter of Brexit. Many global investors are watching the FTSE 100 and waiting to see how bumpy our separation with the EU is going to be, before buying UK shares.
In the short term, it’s impossible to second guess stock markets. However, in the longer run, history shows equities beat almost every other rival investment. UK shares have delivered an average annual return of 12.5% a year since 1925, according to Global Financial Data, easily beating cash at 4.9%, and gold at 7.7%.
UK shares will rebound again, as they’ve always done after every single crash, given time. The best time to invest in the stock market recovery is before it happens, when you can still pick up UK shares at bargain prices. If you wait until afterwards, then everything will be more expensive, and you’ll have missed your chance to load up on bargains.
I prefer to buy assets when they’re out of favour, rather than in fashion. The same goes for gold and Bitcoin. Anybody who bought the precious metal after it hit an all-time high of $2,000 will have been disappointed to see that it’s fallen back since. Gold may well recover, but you should always beware of a bandwagon.
Here’s why I’d buy UK shares today
The same goes for Bitcoin. It briefly touched $12,000 a week or so ago, but is also sliding. As always, this hyper-volatile asset goes down as quickly as it goes up. It is better to buy during a trough rather than a peak.
UK shares also go up and down as well, as we’ve seen this year. They’re down now, and that’s why I’d buy them. They also offer something neither gold nor Bitcoin ever will – income from dividends. This will keep flowing into your portfolio, regardless of what happens to share prices. Dividends have fallen this year, but are on their way back.
As history shows, UK shares should beat all-comers in the longer run. I’m buying while they still look cheap.
The post Gold and Bitcoin are falling! I’d rather buy UK shares ahead of the stock market recovery 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