The Bitcoin price has gained around 170% since the start of the year. Therefore, UK investors may feel that it offers a better means of making a million compared to FTSE 100 and FTSE 250 shares.
However, the stock market may offer better value for money than the virtual currency. It also has a longer track record of growth. In fact, by investing £100 per week in UK shares, it may be possible to make a million over the long run.
Investing £100 per week to make a million
The premise that a sum of £1m can be obtained by investing £100 per week may sound unlikely at first glance. After all, it would take 10,000 weeks, or 192 years, for £100 per week to be worth £1m – assuming that it does not produce any return. As such, buying into the Bitcoin price rise may sound more appealing.
However, investing money in UK shares has historically led to high-single-digit returns that really add up when compounded. For example, the FTSE 100 has recorded an 8% annual total return since its inception in 1984. Assuming the same rate of return in future would turn a £100 weekly investment into a portfolio worth over a million within 35 years.
Buying today’s cheap UK shares instead of Bitcoin
Investing £100 per week in today’s cheap UK shares could produce even higher returns than the FTSE 100. Many companies, such as Aviva, Vodafone and BAE, currently trade on low valuations compared to their historic averages. Certainly, they face difficult operating conditions in the short run caused by the coronavirus pandemic. But their financial performances in recent months have been relatively solid. And with strong market positions, they could deliver impressive returns in the coming years.
By contrast, the Bitcoin price may now offer poor value for money after its gains since the start of the current year. As with any asset, the higher the price paid, the less scope there is for capital appreciation in the long run. Moreover, the virtual currency lacks fundamentals. This means that there are no earnings, nor assets, that can be used to justify its price. This may mean that it currently trades at a price that overvalues its prospects. The end result could be poor performance relative to other assets, such as UK shares.
Making a million from today’s cheap shares
Clearly, Bitcoin and UK shares both face uncertain near-term outlooks. However, in the case of FTSE 100 and FTSE 250 shares, they appear to have attractive prices that take into account the prospect of a challenging economic outlook in 2021. Therefore, they could offer a better means of making a million. Over time, they could turn a modest regular investment into a seven-figure portfolio that significantly improves an investor’s financial prospects over the coming years.