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Forget Bitcoin! Here’s how I’d invest £1k today to try and make a million

Over the last four months, Bitcoin’s price has fallen by around 30%. It’s still up by 130% since the start of the year, which may mean some investors are making significant profits on it.

However, the long-term prospects for the cryptocurrency could be relatively unfavourable. Regulatory challenges, its limited size and a lack of infrastructure could combine to hold back its progress.

As such, investing in a wide range of FTSE 250 shares could be a better idea. They may provide diversity, growth potential and a more obvious route to making a million due to their solid track record of returns.

Bitcoin woes

While Bitcoin may have fallen in recent months, investors won’t know whether it now offers good value for money, due to its lack of fundamentals. Its price level is based solely on investor sentiment, which can clearly change rapidly. Therefore, investors have no way of knowing if it is undervalued or overvalued, which significantly increases the risks of holding it.

Furthermore, Bitcoin’s long-term prospects could be relatively challenging. Its limited size means it may never fully replace traditional currency, while other virtual currencies could become more popular over the coming years.

With regulators already having voiced their concerns about virtual currencies over the past few years, Bitcoin may endure a more difficult period than many investors are expecting. This could hurt its overall performance.

FTSE 250 opportunities

However, the prospects for FTSE 250 shares could be significantly more attractive than Bitcoin. The index has struggled to gain ground in the last few years, with the UK economy’s slowing rate of growth and political risks appearing to hold it back.

This could present a wide range of buying opportunities, with the index currently having an above-average yield of 3.1%. This could mean there are wide margins of safety on offer that translate into high returns in the long run.

The risks of investing in FTSE 250 shares are likely to be significantly lower than for Bitcoin. Certainly, the index can fall by 30% in four months. But its track record shows such periods are likely to only last for a short time, and that the index has always recovered from them to post new record highs.

Therefore, investors can utilise such periods to buy stocks while they trade on low valuations, thereby improving their long-term financial prospects.

Starting today

In previous years, investing £1k in the FTSE 250 would have been difficult. Commission costs may have made it an inefficient use of capital. However, with sharedealing costs having fallen dramatically in recent years, it’s possible to buy a tracker fund that aims to mimic the returns of the FTSE 250, or even start building a portfolio of mid-cap shares with a limited amount of capital.

This could lead to improving financial returns that may one day produce a seven-figure portfolio as further contributions are made.

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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.