Some investors may doubt the long-term potential of UK shares after the recent market crash. After all, some FTSE 100 and FTSE 250 shares continue to trade well below their historic averages. And the indexes themselves are yet to fully recover from their declines.
However, the track record of the stock market shows that it has always experienced ups-and-downs. It has also always recovered from its downturns.
Buying undervalued stocks in an ISA could, therefore, provide higher returns than Bitcoin. It could prove to be a better means of making a million.
Buying the best UK shares
Buying UK shares when they are trading at low prices, such as after a market crash, can be a sound means of generating impressive long-term returns. The stock market has a long track record of experiencing highs and lows, with neither bull markets nor bear markets ever having lasted in perpetuity. As such, investors who buy undervalued shares that have not recovered from their recent declines could profit handsomely from their likely long-term recovery.
In some cases, FTSE 100 and FTSE 250 stocks are trading at exceptionally low price levels right now. Many of them face difficult operating environments that are set to limit their profit growth potential in the coming months. However, they also have solid balance sheets and sound strategies in many cases. This all suggests they have the capacity to take part in an economic recovery. Buying them while they offer wide margins of safety compared to other UK shares could be a means of positioning your ISA portfolio for long-term growth.
Holding for the long term
Clearly, buying UK shares and holding them for a period of months is very unlikely to produce a portfolio valued in excess of £1m. However, the track record of indexes such as the FTSE 100 and FTSE 250 is good. It shows that holding a diverse range of stocks over the long run can produce strong returns when compounding is allowed to work its magic.
For example, investing £100,000 in the FTSE 100 for 30 years could produce a £1m portfolio. That is assuming the index delivers the same 8% annualised total returns that it has done since inception.
Of course, investors may be able to generate market-beating returns by investing in cheap UK shares after the market crash. They may offer high capital return prospects. And their low current prices may translate into higher yields that make an even greater impact on your ISA portfolio when they are reinvested.
Stock market potential
While assets such as Bitcoin may be tempting places to invest, the track record of UK shares shows that they offer a realistic path to building a £1m ISA portfolio. Through buying the best UK shares while they trade at low prices, you could bring your goal of making a million even closer.