Now here’s a surprise. Plenty of people have written off crypto-currency Bitcoin, but it’s actually the best performing asset class so far in 2019.
Bitcoin is back. Maybe
New figures from Interactive Investor show it is up a massive 136% in the year to 31 October, thrashing all comers. The second-best performing asset class, property, was far behind, growing 21.8%, while in third place, developed-world stock markets rose 18.7%.
The Bitcoin price has fallen in recent days so that it currently trades at just below $8,000 a coin, but given that it started the year at around $3,844, then 2019 has to go down as a good year. You can imagine my delight, given that I hold one whole Bitcoin, but I wouldn’t invest more money in it.
Bitcoin is up a whopping 3,932% measured over five years, but don’t trade it on the assumption that it will repeat that kind of return. The big money was made before most people had heard of it and you won’t make it now.
You could incur major losses, though. Plenty of people have. Bitcoin now trades well below its all-time high of $20,000 in 2017, although to be fair, it hasn’t fallen to zero, as some believed it might.
It could though, one day.
Falling back down
If you buy Bitcoin, you have must brace yourself for massive volatility. Interactive Investor figures show it is actually the worst performing asset class in the three months to 31 October, as investor enthusiasm has ebbed again.
Interactive’s Myron Jobson says a continuing problem is that unlike stocks and shares, where metrics such as the price-to-earnings ratio help you value stocks, Bitcoin’s value is impossible to judge, as it doesn’t have a long enough track record to draw conclusions on trends and behaviour.
I would second that. The stock market has been generating wealth for well over a century, and we have learned a lot of things about its behaviour in that time.
A better way to make a million
We know that it is also volatile, and can crash by anything up to 50%, but we also know that it quickly recovers, as investors rush in seeking bargains, and that over the longer run, stocks and shares beat almost every other asset class. If you are looking to generate long-term wealth for your retirement – and who isn’t? – then stocks and shares should be your first port of call. With time and patience, they could even make you a tax-free millionaire.
Some individual shares will deliver growth that almost stands comparison with Bitcoin, for example, this phenomenal stock is up 450% over five years. However, as with cryptos, past performance is no guide to the future, so you need to invest in a spread of different stocks, to diversify and reduce risk. Never put all your eggs in one basket, whatever the asset class.
There may still be a place for Bitcoin in your portfolio. There is a place in mine – but only a tiny one. I wouldn’t completely right off Bitcoin, but in the long run, the stock market is still the best way to build your wealth.