I’d buy UK shares today. Even though some investors who were early to Bitcoin made fortunes by buying and owning the crypto. Indeed, there are people around today claiming that Bitcoin made them millionaires.
And it’s easy to see how that happened when, just 10 years ago, a Bitcoin was near $1. Today, it’s close to $20,000. Meanwhile, the price of gold has also been strong since finding a low near the beginning of the century.
Why I’d shun Bitcoin and gold for UK shares
Gold has a reputation for providing investors with a safe haven in troubled economic times. And some argue Bitcoin could be behaving like a gold standard to cryptocurrencies. But whatever the truth about that, much of what drives the price of Bitcoin and gold is pure speculation.
And in their elevated positions, both Bitcoin and gold have a lot of clear blue sky beneath them. It doesn’t take a big stretch to imagine economic times becoming less troubled. And if that happens, we could see Bitcoin and gold losing their updrafts and floating back down again.
For example, an end to the Brexit saga is in sight. And it’s a similar story with the coronavirus pandemic. If the economic news flow from the real world gains positive traction, shares could blossom while alternative assets such as Bitcoin and gold wilt.
But even in the worst of economic times, I’m inclined to invest in shares and share-backed vehicles such as funds and trackers. For me, equities are a superior asset class. I think of them as active assets because the underlying businesses can build value while I hold shares. And there’s no such advantage from holding Bitcoin and gold because they are inactive, inert assets.
I’d target quality businesses
Underlying operational progress in a business can push a share price higher. And that makes sense because the valuation has to accommodate rising profits, cash balances and other internal assets owned by the business. But that kind of value-driving engine is missing from Bitcoin and gold.
So, I’d invest in UK shares backed by strong, high-quality businesses. And I tend to find those at the defensive end of the defensive/cyclical continuum. To me, those businesses with cyclical operations don’t often make good long-term investments. I’d describe them as poor-quality enterprises. So, I’m wary of stocks in sectors such as banking, oil production & exploration, mining, retail, hospitality, travel and others.
However, I’m keen on sectors such as utilities, energy supply, fast-moving-consumer goods, food supply, healthcare and others. And, right now, I’d aim to own shares such as AG Barr, Britvic, Computacenter, Cranswick, National Grid, Nichols and PZ Cussons. I’d buy each share and hold it for decades while reinvesting dividends to compound my long-term gains.