The price of Bitcoin has exhibited probably more volatility than any other asset available to investors in the market. Stories detailing the rags-to-riches ascent of Bitcoin millionaires capture the imaginations of readers everywhere, with every person wishing that they had bought the cryptocurrency when it was trading for less than a $100.
Stories like this may tempt you to invest your savings in Bitcoin. But what comes up quickly has a tendency to come down quickly, and I think that you would be much better served by investing your hard-earned cash in a diversified portfolio of income-generating stocks.
Such a strategy might not provide the kind of headline-grabbing returns that were enjoyed by the fortunate few who happened to possess Bitcoin before the price took off in 2017, but over the long term I believe that it provides the investor with a much better chance of building up a good pot of retirement savings.
Lloyds
Shares of UK banking giant Lloyds Banking Group (LSE: LLOY) currently sport a very healthy dividend yield of 5.5%, outstripping the average for the FTSE 100 of 4.5%. This number gets even better if you look at the forecast 2020 dividend for Lloyds – my colleague Edward Sheldon reports that this is 3.55p per share, which at the current share price of 58p is good for a yield of 6.1%. That’s not too bad for one of the UK’s biggest financial groups.
Moreover, I think that a lot of the doom and gloom that has hung over the UK financial sector is rooted in political uncertainty – over Brexit, and also due to the question of what the next government will look like. Recently, there have been a number of developments that suggest that the political impasse may be broken.
Firstly, the polls consistently indicate that Prime Minister Boris Johnson’s Conservative Party is on track to secure a majority in Parliament in the 12 December election. Secondly, the likelihood of this outcome has been boosted by the decision of Nigel Farage’s Brexit Party to not run against Conservative candidates, and to focus instead on contesting Labour seats. Jeremy Corbyn’s Labour Party runs on a platform that is decidedly anti-big bank and pro-regulation.
Leaving aside the question of whether these policies are good in a broader sense, it’s pretty clear that they are perceived as hostile by investors, and so a Conservative victory would therefore boost financial stocks.
This isn’t to say that everything is perfect at Lloyds. Charges relating to mis-selling of payment protection insurance (PPI) continue to be a thorn in the bank’s side, with management recently putting aside an additional £1.8b for future claims.
On top of this, recent trading updates have shown revenues falling – in the last quarter alone they were down 6.2% year on year. But these low expectations are already baked into the share price, and good investing requires you to go against the grain occasionally.