Forget gold and Bitcoin. I’d buy cheap UK shares to retire with a generous passive income

Buying cheap UK shares could produce higher returns than gold or Bitcoin in my view. Doing so may allow you to retire on a generous passive income.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

The stock market crash means you have a wide range of cheap UK shares available to buy today. Over the long run, they could deliver impressive returns that enable you to obtain a surprisingly large retirement nest egg. From that, you could receive a generous passive income that provides financial freedom in older age.

Therefore, gold and Bitcoin may be more popular assets among investors at the present time. However, their recent price gains and the appeal of British shares may mean that investing your money in the stock market is a superior move.

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The prospects for cheap UK shares

The short-term prospects for cheap UK shares are relatively uncertain. Risks such as Brexit and economic difficulties such as rising unemployment may weigh on the financial performances of many FTSE 100 and FTSE 250 stocks in the coming months. This may negatively impact on investor sentiment, thereby causing share prices to come under pressure following their recent rebound.

However, the valuations of many British shares suggest that investors have largely factored in an uncertain outlook. Many high-quality companies currently trade at prices that are lower than they have been for many years. Current prices may undervalue their financial strength and their capacity to mount successful recoveries over the coming years.

Therefore, buying a selection of cheap UK shares now may prove to be a profitable move. They may be among those investments that benefit the most from a likely economic recovery in the years ahead. Fiscal policy stimulus and a loose monetary policy may combine to produce improving operating conditions for many businesses that translate into high returns.

Investing in gold and Bitcoin

Of course, some investors may wish to avoid cheap UK shares in favour of other assets such as Bitcoin and gold. They are relatively popular assets at the present time, with their prices increasing rapidly over the course of 2020.

However, higher prices can mean less scope for capital returns. Investors may have factored in a positive outlook for both assets that may not ultimately play out. For example, an improving economic outlook may mean that gold’s appeal as a defensive asset is reduced. Meanwhile, Bitcoin may suffer from regulatory change that limits its capacity to become more prevalent outside of an investment opportunity.

The long track record of success for investors who buy cheap UK shares suggests that they offer a more reliable means of building a retirement portfolio. From this, you could eventually obtain a worthwhile passive income that provides greater financial freedom in older age. As such, now could be the right time to start building a portfolio of high-quality businesses while they trade at low prices for what could prove to be a limited amount of time.

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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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