Bitcoin provides an opportunity to invest in a relatively new idea… a virtual currency that some investors believe could replace traditional currencies. For many individuals, this alone merits buying it at the present time. After all, the world is becoming increasingly digital, and it seems likely that traditional currencies will eventually be replaced by a virtual currency of one kind or another.
The reality, though, is that buying Bitcoin may not be a sound move when it comes to seeking to generate high long-term returns. The cryptocurrency faces a number of challenges which could prevent it from gaining traction in the real world. And with financial products such as a Lifetime ISA offering the potential to invest in fast-growing stocks, there may be superior opportunities available elsewhere.
Challenging future
While a virtual currency may eventually replace traditional currencies, Bitcoin seems unlikely to achieve that goal. It lacks real-world usage potential due in part to its limited size. It also lacks the required infrastructure to appeal to consumers at a time when convenience and security are of increasing importance. And with regulators across the globe apparently taking a dim view regarding its future potential, its prospects appear to be highly uncertain.
Moreover, it’s impossible to say what Bitcoin is worth. Unlike most assets, there’re no financials or other figures to determine what its price should be. It could be dirt-cheap at the present time, or it could prove to be grossly overpriced. Investors have no way of knowing this, so to buy it now would be more akin to a gamble rather than an investment.
Lifetime ISA
In contrast, investing in shares through a Lifetime ISA could offer a worthwhile means of generating wealth over a sustained time period. For individuals under the age of 40, a Lifetime ISA could catalyse retirement planning through its favourable tax treatment, as well as the government bonus. This is paid on every £1 invested through a Lifetime ISA up to a limit of a £1,000 bonus per year. This alone could be worth as much as £32,000 over a lifetime, since it’s available to anyone between the ages of 18 and 50 who has a Lifetime ISA.
Although the stock market may have experienced a volatile period of late, its track record of performance suggests it may offer an impressive long-term outlook. The FTSE 100, for example, has recorded annualised total returns of over 9% in the last decade. Since it offers a diverse range of companies operating in different regions of the globe, it’s possible for an investor to obtain a high growth rate. With its constituents required to produce annual reports, it’s possible to determine their intrinsic value, and to seek a margin of safety based upon it.
While potentially less exciting than investing in Bitcoin, obtaining a government bonus through a Lifetime ISA and investing in the stock market could be a more reliable means of improving your financial future.