The recent market crash may have caused some investors to avoid UK shares and buy Bitcoin when seeking to make a million. While this strategy may have thus far been profitable due to the virtual currency’s doubling since its 2020 lows in March, its risks continue to be relatively high.
Therefore, over the long run, a portfolio of FTSE 100 and FTSE 250 shares could outperform it. With many of them currently trading at low price levels, now could be the right time to buy a diverse range of shares to improve your chances of making a million.
Bitcoin’s weaknesses
Many investors selling UK shares to buy Bitcoin fail to examine the cryptocurrency’s risks. They include the fact that it lacks fundamentals. Even after its recent price rise, investors have no way of knowing whether it is currently undervalued or overvalued. Its price is completely dependent on investor sentiment, which can fluctuate significantly and be subject to major change without clear reason.
Furthermore, Bitcoin faces an uncertain future due to its limited size and lack of infrastructure. This may inhibit its capacity to fully replace traditional currency, and could lead to declining investor sentiment. There are also a wide range of other virtual currencies that could dilute demand among investors for Bitcoin. This may mean that its recent price rise is not sustained over the long run.
The appeal of UK shares
Of course, UK shares are not without their own risks. The economy’s uncertain outlook means that many FTSE 100 and FTSE 250 companies face challenging trading conditions that could mean their share price prospects are downbeat.
However, their fundamentals suggest they are undervalued in many cases. Investors can, therefore, buy them while they offer wide margins of safety ahead of a likely recovery. And, with indexes such as the FTSE 100 and FTSE 250 having long track records of turnarounds following their various bear markets, buying cheap stocks now could be a profitable move.
Moreover, UK shares offer the chance to diversify across a wide range of industries and regions. This may reduce your overall risk – especially when compared to Bitcoin.
Making a million
Buying UK shares could produce a portfolio valued at over £1m in the long run. For example, let us assume the stock market continues to deliver an annual return of around 8%. Its long-term track record suggests that is reasonable. In that case, a £100,000 initial investment, or £750 a month, would be worth over £1m within 30 years.
Yes, Bitcoin may provide the potential for quicker returns than stocks. But its risks mean its recent performance may not necessarily continue uninterrupted. While many shares are trading at low prices following the recent market crash, now could be the right time to buy them to obtain a seven-figure portfolio in the coming years.