Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Forget Bitcoin! I’d buy cheap UK shares in a Stocks and Shares ISA today

Published 06/08/2020, 08:32
Updated 06/08/2020, 08:40
Forget Bitcoin! I’d buy cheap UK shares in a Stocks and Shares ISA today

Forget Bitcoin! I’d buy cheap UK shares in a Stocks and Shares ISA today

Having more than doubled since its March low, some investors may now be contemplating buying Bitcoin instead of UK shares. After all, the cryptocurrency has become popular among investors in a period where economic growth may be lacking, and many companies could face challenging operating conditions.

However, FTSE 100 and FTSE 250 shares have a long history of recovery that could mean they offer good value for money right now. Through buying a selection of them in a Stocks and Shares ISA, you could obtain a more attractive risk/reward opportunity than through purchasing Bitcoin.

The recovery potential of UK shares A market rally for UK shares may seem unlikely at present. However, the track record of the FTSE 100 and FTSE 250 indexes suggests it’s very likely to occur in the long run. Both indexes have experienced similarly challenging periods to those present today, where economic growth is poor, unemployment is rising and investor sentiment is weak.

However, they’ve posted annualised returns in the high-single digits since their inception, and have always recovered from their challenging periods to post new record highs.

For example, a sustained bull market seemed very unlikely following the 1987 crash, as well as after the tech bubble and the global financial crisis. However, investors who purchased high-quality businesses that survived weak operating conditions in the short run are likely to have benefitted from the bull markets that followed those bear markets.

Although this strategy is unlikely to yield high returns from UK shares in the short run, it can lead to a surprisingly large ISA portfolio valuation in the long run.

Diversification Of course, diversifying across multiple UK shares is likely to be of great importance in the coming years. The global economy could change rapidly, as consumer trends and habits evolve at a relatively fast pace. As such, it’s currently unclear which sectors and regions will be the major winners over the long run.

Therefore, having exposure to a variety of businesses that operate in different sectors and geographies could be a shrewd move.

By its very nature, diversifying through Bitcoin is a much more difficult process than it is when purchasing FTSE 100 and FTSE 250 shares. Moreover, the virtual currency’s recent gains are based purely on investor sentiment, rather than improving fundamentals.

It doesn’t have the multi-decade track record of recovery of the stock market, and therefore may be less dependable than building an ISA portfolio of UK shares over the long run.

A long-term view Bitcoin may continue to outperform UK shares in the short run. But the long-term risk/reward opportunity provided by the stock market appears to be more attractive than that offered by the virtual currency. As such, now could be the right time to buy bargain stocks that are likely to post strong recoveries in the coming years.

The post Forget Bitcoin! I’d buy cheap UK shares in a Stocks and Shares ISA today appeared first on The Motley Fool UK.

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020

First published on The Motley Fool

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.