I wrote earlier this year about Bitcoin staging a dramatic recovery and discussed whether it represented a value investment as it breached £10,000 per coin again in July.
I was highly sceptical about the long-term prospects of Bitcoin due to its inherent volatility and lack of regulation. My scepticism has been compounded by reports this week that one solitary trader could have been behind the surge that led Bitcoin to highs of nearly £14,000 in 2017.
The lack of any underlying assets to back up the cryptocurrency means that the price is solely driven by what an investor is willing to pay for it – not ideal as a long-term investment strategy.
If I was looking towards retirement in the hope of having a pretty sum to look forward to, I don’t think Bitcoin is the way to go.
Long-term outlook
There are a number of other investments that I believe will significantly outperform Bitcoin in the long run – I would focus on blue-chip stocks that have established businesses and cash assets behind them.
A great way to get started with stocks and shares is to look at tracker funds rather than attempting to pick individual companies to outperform the market.
Index tracker funds allow the investor to closely track the performance of a given index, or group of stocks, such as the UK’s FTSE 100.
Stocks and shares from the Footsie index are some of the most well-established and reputable companies in the world, and I’d back the majority of them to outperform Bitcoin in the long run.
Instant diversification
These types of investments are popular for a number of reasons, particularly for beginner investors as they limit exposure to single sectors and give you variety.
That said, when you buy tracker funds as an investor you will only reap the benefit of overall growth of the companies contained in the index, rather than any spectacular dividends paid out by individual firms. Even so, I still see them as a solid investment, particularly those which track some of the world’s major markets.
Despite the ongoing uncertainty caused by Brexit and the potential knock-on effects for the UK economy, it’s my view that the FTSE 100 will provide attractive returns as a long-term play.
Expecting to grow your portfolio massively over the next year or two is highly unlikely when looking at stocks and shares – particularly for tracker funds. However, when looking at a 10–20 year investment, historical performance suggests the FTSE 100 and other blue-chip stock indices will provide healthy returns.
If I had invested in a FTSE 100 index tracker 10 years ago today, I’d be looking at growth of around 40% – not a bad return for a highly diversified ready-made portfolio.
As well as UK indices, other international market trackers could also represent a sound retirement investment, including the likes of the S&P 500 in the US. With a long-term investment outlook as a starting point, the market should look after the rest.