The crypto crash confirms every suspicion I’ve had ever had about alt-coins, and I’d much rather buy UK shares instead.
I find our stock market particularly attractive today, because the FTSE 100 is packed full of bargains after a difficult year. I’m snapping up my top targets whenever I have cash to trade.
Before this year’s crash, crypto advocates were claiming Bitcoin had somehow transformed itself into digital gold. That was a total delusion. As is nearly every claim made about crypto so far. No coin has a killer use to justify the hype. The only reason Bitcoin attracts so much attention is that it made untold fortunes for early adopters. More recent investors are more likely to have lost money instead.
I reckon UK shares beat Bitcoin
I still favoured FTSE 100 shares when crypto mania was at its zenith. The names listed on the index are real companies, producing real goods and services, with a real value in the real world, and employ real people. Call me old-fashioned but I’d choose real life over the virtual alternative any day.
That doesn’t mean the FTSE 100 will always make money. The last five years have been disappointing, with the index ending up pretty much where it started, at around 7,350. It has shown its mettle in this troubled year, though. While the US S&P 500 is down 17.52% year-to-date and the Nasdaq has crashed 29.80%, the FTSE 100 has dipped just 1.99%.
That headline return figure doesn’t show the real attraction of investing in the index, which is to generate dividend income. This year, the average yield has been 4.1% across the FTSE 100, and I plough all of my income back into my portfolio to buy more shares. That way I benefit from today’s low valuations, because my reinvested dividends pick up more stock.
The FTSE 100 has jumped by 6.8% in the last month, and some are claiming the recovery is here. I anticipate more volatility, though. The UK is sliding into recession, with GDP falling 0.2% in the quarter to September 30. Yet short-term share price swings don’t bother me, as I’m investing for a minimum of 15 to 20 years.
I’m not buying crypto
In marked contrast to UK shares, crypto doesn’t generate any income. That’s a serious drawback given that I can currently get a yield of 6.55% a year courtesy of Aviva, 7.34% from abrdn or 6.49% from Anglo American (and I’m not on the letter ‘B’ yet).
Of course, Bitcoin is not dead yet. I’m still holding onto the lone coin I own, as demand could revive when investors get their mojo back. It has a hard road ahead of it, though, as regulatory demands increase.
While the share prices of individual companies can crash, like Bitcoin has, there are ways of reducing the risk. I research every stock purchase carefully, build a balanced portfolio covering different companies and sectors, and invest for the long, long term.
Another reason I prefer to buy UK shares is that I don’t have to worry that my crypto wallet will be stolen or my unregulated exchange won’t return my money. They won’t make me an overnight millionaire, but then, neither will Bitcoin these days.
This post was originally published on Motley Fool
