At the time of writing, the Bitcoin price sits at just under £7,400, or $9,500. On that basis, if you’ve £10,000 to invest today, you could buy 1.4 Bitcoins if you want to invest in the cryptocurrency.
However, I think there’s a much better way to invest that £10k today if you want to make a million.
Investment vs speculation
One of the problems with Bitcoin as an investment is the fact that it has no underlying cash flows. This means the asset is worth as much as other investors are willing to pay for it. Unlike stocks, which are valued based on the underlying business’s profitability.
The lack of fundamental value underpinning the Bitcoin price makes it more of a speculative asset than long-term investing.
As a result, I think it’s only sensible to invest a small percentage of your wealth in the crypto asset. If you allocate 5-10% of your portfolio to Bitcoin, you can benefit from any potential upside while limiting the cost if things go wrong.
If you only have £10k to invest, I’d recommend staying away from Bitcoin altogether and investing your money in high-quality blue-chip stocks instead.
One of the best ways to get exposure to a range of high-quality blue-chip stocks without picking the names yourself is with a passive tracker fund. You can buy passive tracker funds for the FTSE 100, FTSE 250 and other indexes around the world. International indexes might even offer better returns. The average annual return for the S&P 500, for example, is around 10% (based on data going back 100 years).
At this rate of return (10%), I calculate it would take 47 years to turn £10,000 into £1m. If you invest with a LISA or SIPP, you could hit the target even sooner.
With every £1,000 LISA contribution, the government will add an extra £250, up to a maximum of £1,000 a year. Therefore, you could receive an extra £2,500 of free cash if you invested a £10,000 lump sum in a LISA over the space of 2.5 years. This extra money would reduce the time it takes to hit the £1m target by three years.
The S&P 500 isn’t the only index available to investors who want to invest a lump sum for a future. The FTSE 250 has generated similar returns over the past decade.
The index is focused on UK-based mid-cap companies that have more growth opportunities, but tend to come with much more volatility. That said, compared to an investment in Bitcoin, the FTSE 250 volatility is relatively benign.
The bottom line
So that’s how I’d invest £10,000 today to make a million. You don’t need any special skills or inside information to make this life-changing sum. All you need is patience and a long-term outlook. The market will take care of the rest for you.
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Rupert Hargreaves owns no share 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.