FTSE 100 shares are looking cheap right now. Following the stock market crash, prices are 20% lower than they were. This look like an excellent opportunity for long-term investors to top up their portfolio, with the aim of generating enough wealth to retire early if that’s what they want to do.
I’m worried many will fluff this moment. Millions are leaving their money sitting in Cash ISAs, getting a near-zero return. Others are gambling on the gold price rising further, even though it is near its all-time high today.
I wouldn’t put money into either cash or gold right now. Instead, I would scour the market for cheap FTSE 100 shares, before the next leg of the recovery. I think they give you a better chance of getting rich, and taking charge of when you retire.
Forget the Cash ISA and gold!
In the short run, FTSE 100 shares are volatile. Markets can crash at any moment, as we saw in March. However, history shows that in the longer run, share prices quickly recover. They often rebound quicker than you think. That’s exactly what happened in April and May. Investors who held back from buying shares in the hope they would get cheaper were left kicking themselves as stocks rebounded at speed instead.
You can never time the exact bottom of the market. What you can do is buy shares when prices are low, and you have a bit of money to spare. Then leave it to grow for the long term. I’m talking years when I say that. Decades. That’s how you build long-term wealth from FTSE 100 shares. They do not double in value overnight. It takes time.
The big problem with cash is that the value of your money is likely to fall in real terms. Right now, the average easy access Cash ISA pays just 0.45%. That is a miserly sum. Worse, there is little sign of things improving. Central bankers around the world, including the Bank of England, look set to keep interest rates low for years.
I’d buy bargain FTSE 100 shares today
Long-term investors have made big money out of gold. The price is up 25% in a year, to around $1,775 per ounce. There is space for a bit of gold in your portfolio, as a diversifier. The gold price tends to rise when shares fall, and fall when they rise (although not always). This protects your portfolio from the peaks and troughs.
However, I wouldn’t recommend holding more than 5 or 10% of your portfolio in gold. Also, I wouldn’t buy now, at today’s high price.
Instead, I would take advantage of the stock market crash to buy cheap FTSE 100 shares. They give you both growth and dividend income. Remember, gold pays no income, and a Cash ISA scarcely does.
If you are keen to get rich and retire early, that’s where I’d start.