Personally, I wouldn’t buy cash, gold or Bitcoin right now. I’d buy UK shares because they offer superior income and growth prospects, despite the pandemic.
There’s been a lot of hullabaloo about UK companies cutting their dividends this year, and understandably so. However, we also need to make some noise about how many firms are starting to reinstate shareholder payouts.
You can still get blockbusting income from UK shares, which is why I’d buy them now. By comparison, cash, gold and Bitcoin give you little income, or none at all.
I’d buy UK shares now
It’s now almost impossible to get a decent rate of interest on cash. If you lock your money away for five years with RCI Bank, for example, you’ll get just 1.05% a year in return. Remember, that’s a market leading rate. Most accounts pay much less.
By contrast, you can get an income of 5.89% a year from FTSE 100 pharmaceutical company GlaxoSmithKline, or 9.27% from Legal & General Group.
Many investors may be surprised by how much income they can still get from top UK shares, given that three quarters either cut or suspended shareholder payouts in the second quarter, according to Link Group’s UK Dividend Monitor.
Shareholder payouts across 2020 are set to drop by around 40%, but the good news is they should rise around 15% next year. In 2021, investors can still expect income of up to 3.6% from UK shares. If you concentrate your efforts and buy the most generous dividend payers, you could get a lot more than that.
Top UK shares will always beat gold and Bitcoin for income, because neither pays any income at all. Instead, you are wholly reliant on price growth to make money.
The gold price has dipped after busting through its all-time high of $2,000 an ounce in August. Investors who got sucked in at the top will be hurting. I’d be wary of buying gold today, because I think the price could fall once the post-pandemic recovery kicks in.
Cash, gold and Bitcoin don’t tempt me
Bitcoin is on a roll. Its price has just hit around $12,250. I’d urge caution, though. The time to buy the cryptocurrency is when the price is down, rather than up. That’s if you want to buy at all. It’s too volatile for me.
Personally, I’m focusing my efforts on buying UK shares right now. There are just too many unmissable bargains. History shows the best time to buy UK shares is after a stock market crash, because they always recover if you give them time.
Since 1925, cash has delivered an average annual return of 4.9% (it will be much lower than that for years). Gold did better, growing 7.7% a year on average. UK shares thrashed them both by growing 12.5% a year, according to Global Financial Data. Better still, you can take all your returns free of income and capital gains tax using your Stocks and Shares ISA allowance.
Today, you can find loads of top companies at bargain prices. That’s why I’d buy UK shares now.