Want to make a million? There are people out there who think Bitcoin and other cryptocurrencies are the way to do it, but I think that’s just deluded.
In fact, I reckon it’s a very good way to lose a lot of money, especially as the anonymity and lack of regulation makes cryptocurrencies wide open to various kinds of theft — and there are lot of hackers out there trying to break into crypto exchanges, whereas they’d stand almost no chance of penetrating a bank’s defences.
The Russian exchange Wex is a fine example. Wex closed down in 2018, leaving investors out of pocket to the tune of nearly half a billion dollars. Nobody knows where the money went, but there are plenty of conspiracy theories doing the rounds — one is that Wex was plundered by Russia’s Federal Security Service (the successor of the KGB).
I’m not sure I believe that, but one thing is for sure and that’s the disappearance of the money.
No, I remain convinced that the best chance any of us has of making a million is by investing in stock market shares and holding them for the long term. It’s not a get-rich-quick scheme like Bitcoin (or, I should say, a get-poor-quick scheme for those who bought in at the peak of the madness). It will take time and a bit of focus on investing as much as you can regularly — ideally in a tax-free ISA account.
You might point to the weak few years we’ve had of late, but the FTSE 100 has been strengthening towards the end of 2019, and I really think that could be the start of a continuing trend. A long-term strategy can smooth out the short-term ups and downs and take care of any poor timing, and investing regularly will spread that risk anyway. And if you happen upon the start of a bull market, you can benefit from a bit of fortunate timing too.
But are we at such a point? The FTSE 100 has risen by 13.5% so far in 2019 (with just one more full day to go), which is an unusually good performance. But that’s mostly come since the election, and prior to that, the gain was only a little over 6% (which is close to the index’s long-term average).
Clearly, the election outcome has helped reduce the curse of Brexit uncertainty, and I’m seeing the confidence that’s returning to the FTSE 100 as a good sign.
But I think there’s a better indicator in the FTSE 250, which tends to outperform its larger sibling during good times. It’s home to far more smaller companies, and they’re the ones with the better potential to attract growth investors.
Over the past couple of years though, that difference has disappeared, with the two indexes pretty much mirroring each other’s progress. However, in recent months, and especially in December, the smaller index has been pulling ahead again. While the two were neck and neck for much of the year, the FTSE 250 has soared to a 25% rise year-to-date.
We still face some Brexit uncertainty, but 2020 could be a great year to invest in the FTSE 100 and the FTSE 250 in your quest to become a millionaire. And at least the KGB won’t get your money.
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