Bitcoin’s recent price rise may convince some investors it offers a better chance of making a million than UK shares. However, the long track record of growth from indexes such as the FTSE 100 and FTSE 250 suggests that stocks can produce impressive returns over the long run.
In fact, by investing regularly in a basket of high-quality stocks after the recent market crash, you could build a £1m portfolio. Not only could it deliver higher returns than Bitcoin, it may offer less risk than the virtual currency.
Return prospects of UK shares versus Bitcoin
Although Bitcoin may have outperformed UK shares over recent months, in the long run the stock market provides significant growth potential. For example, indexes such as the FTSE 100 and FTSE 250 have produced annualised high single-digit gains since their inceptions. And this trend looks set to continue in the coming years.
In fact, investing in a diverse range of stocks could produce even higher returns than the market average due to the recent market crash. Many high-quality businesses are currently trading on exceptionally low valuations. In fact, significantly below their historic averages. With the stock market having always recovered from its lows, they could offer strong turnaround potential. Through buying them now while they’re priced at low levels, you could generate some impressive returns as they recover.
The risks of Bitcoin versus stocks
Even though Bitcoin may outperform UK shares in the short run, its lack of fundamentals means that investors have no way of knowing whether it offers good value for money. Therefore, its current price may already factor in its long-term growth prospects. This could mean that buying it today proves to be a relatively risky decision.
By contrast, the financial figures for many companies suggest they offer wide margins of safety at the present time. Investors can access these figures freely and without charge online. This enables them to build a diverse portfolio that offers less risk than Bitcoin. And at a time when the outlook for the economy continues to be very uncertain.
Making a million
Assuming that UK shares produce an 8% return a year, as per the FTSE 100’s annual returns since its inception 36 years ago, investing £500 per month could produce a portfolio valued at over £1m within 35 years. However, since many stocks appear to be undervalued at the present time, they could produce even higher returns in the coming years.
Therefore, now could be the right time to buy a selection of them on a regular basis. They may have experienced a disappointing 2020 so far by comparison to other assets such as Bitcoin. But, when it comes to their risk/reward appeal, they appear to be significantly more attractive than the virtual currency.