UK shares may be viewed less favourably by some investors than Bitcoin and buy-to-let property at the moment. The stock market crash means that indexes such as the FTSE 100 trade 20%+ lower than they did at the start of the year. Meanwhile, Bitcoin has gained 50% in 2020 and house prices are at a record high.
However, the stock market could offer superior long-term return potential than other mainstream assets. Cheap shares can recover to improve your chances of making a million.
The 2020 stock market crash
The recent stock market crash means many UK shares trade at cheap prices. However, this is not the first time that indexes such as the FTSE 100 and FTSE 250 have seen bear markets. There have been many market declines and corrections in recent decades. The common theme among them? Stock prices have generally recovered from their lows as the economic outlook has improved and investor sentiment has done likewise.
Therefore, it is logical for investors to become more active in the stock market when it is at a low price level. In other words, buying UK shares makes more sense now than it has done in previous years because stock prices offer long-term recovery potential. Buying a diverse range of companies in different sectors means that you can obtain impressive returns. These returns may be ahead of the stock market’s long-term average over the coming years.
Paying high prices after recent gains
UK shares trade at cheap prices in many cases. By contrast, house prices have reached record highs due to factors such as stamp duty relief and low interest rates. As such, there may be less scope for capital gains in the coming years for buy-to-let investors. A weak economic outlook for the UK and uncertainty surrounding government policies towards the housing market mean there is no guarantee that recent house price growth will persist beyond the short run.
Meanwhile, Bitcoin has a lack of fundamentals. This means that it is impossible to know whether the virtual currency offers good value for money today. It also faces regulatory risks that could hamper its capacity to replace traditional currencies. Furthermore, competition from other cryptocurrencies may dilute demand among investors over the coming years.
Making a million from UK shares
Therefore, buying cheap UK shares for the long run could be the most logical means of making a million. Investing £750 per month at the stock market’s historic 8% annual return would lead to a portfolio valued at over £1m within 30 years.
As such, many investors could obtain a surprisingly large portfolio simply from buying a diverse range of shares today and holding them for the long run. They may even be able to generate market-beating returns due to low valuations that are on offer following the stock market crash.