In the aftermath of the stock market crash, many investors turned their back on traditional equities in favour of investments such as Bitcoin. Though a risky asset itself, Bitcoin is attractive to many investors for its supposed explosive upside potential. However, regardless of the cryptocurrency’s prospects, I’m confident that investing regularly in a diverse selection of the best UK shares is a superior and safer way to build wealth over the long term. Here’s why.
The problem with investing in Bitcoin
My main issue with Bitcoin, is that there’s no way to determine its fundamental value. The same applies to other cryptocurrencies. In other words, sheer investor speculation drives the price one way or the other. This partly explains Bitcoin’s wild price fluctuations, which can regularly result in the currency’s valuation rising or falling substantially in a just a matter of days.
The future utility of Bitcoin is another debate. Ultimately, I’m not sure anyone can be certain of its impending success of doom. Either way, it has now been in circulation for around 11 years and substantial steps forward are yet to be made in terms of its day-to-day usage. For now, Bitcoin remains a speculative asset.
By saying this, I’m not ruling out a small exposure to the currency as part of a well-diversified investment portfolio. Rather, I’m warning against having Bitcoin as a core holding. In my view, this place is best reserved for UK shares and funds that invest in a range of high-quality international companies.
Buying the best UK shares on the market
Speaking of which, UK investors are spoilt for choice when it comes to investing in firms with solid business fundamentals. What’s more, some of these companies are trading on vastly reduced valuations as a result of the stock market crash and the damage caused by Covid-19.
Alternatively, you could focus on the companies that have continued to thrive, in spite of the unfavourable trading conditions. As well as indicating the resilience of the underlying business, such companies have proven their ability to prosper amidst harsh economic conditions. Given the abundance of short-term risks that remain on the horizon, investing in these companies could be a wise play.
Make a million with high-quality British shares
Once you’ve consolidated your investment portfolio and added some of the best UK shares to the ranks, you’ve pretty much done most of the hard work. From here, it’s time to let the wonders of time and compounding to take effect.
If your investment horizon is long enough and you’re able to achieve a tidy annual return, it’s entirely feasible to make a million by investing in UK shares.
To illustrate, let’s say you invest £500 a month and manage an 8% yearly return. After 35 years, your investment pot would be worth £1,078,202! With that in mind, I’d prioritise buying high-quality shares over and above investing in Bitcoin. In my view, it’s a much better way of building serious wealth.
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Matthew Dumigan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
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