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Forget Bitcoin! I’d invest £20k today inside a Stocks and Shares ISA to retire early

Everybody feels the lure of the get-rich-quick investment at some point and there is no question about it, Bitcoin is the most exciting of recent times.

Bitcoin is hugely volatile

The problem is that any investment offering a fast-track to riches tends to be hugely risky, and all too often investors come unstuck. Right now, the crypto-currency is on the up, trading at more than $8,600 per coin, but I would be wary of parting with my money at this point, because it could surrender its recent gains in a matter of days.

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If it slips, you could suddenly find yourself sitting on a major loss. So my advice today is, approach with caution.

If you are investing for retirement, and want to build up a big enough pension pot to give you financial freedom, and even retire early, I still believe a Stocks and Shares ISA is a far superior way of achieving that.

By investing in equities, you are free to spread your money across hundreds or even thousands of companies in the UK and beyond. This means your money is exposed to the fortunes of the global economy, where real-world companies generate real-world revenues, rather than the virtual returns you get from Bitcoin.

You don’t get dividends from Bitcoin

These company revenues will drive their share prices higher in the longer run, and allow them to pay out generous dividends to loyal investors. This is how stock markets make you rich in the longer term, from a combination of the two.

Bitcoin doesn’t pay you any interest or dividends. You only gain when the coin rises in value, and those movements are fuelled entirely by investor sentiment, rather than any practical use it may offer investors. Right now, it doesn’t really have one, except as a (highly volatile) store of value.

Global stock markets have enjoyed a bull run that has lasted more than a decade, with little sign of letting up. There will always be risks, of course. Until recently, investors were fretting over the US-China trade war and tensions with Iran. Right now, it is the coronavirus that is making people nervous. Tomorrow, it may be something else.

Ignore that wall of worry

You have to look beyond these short-term worries, and look to the longer run, because over the years, stock markets outperform almost every other investment, a trend I expect to continue for the foreseeable future.

That is why I put the vast majority of my investment wealth in stocks and shares, and reckon you should as well. Stock markets will fall from time to time, but that is actually an opportunity, to pick up more stock at the lower price, then wait for the recovery to kick in.

While you’re hanging around, the income from those dividends will keep flowing, slowly making you richer. That’s another great reason to choose shares over Bitcoin to fund your early retirement.

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Harvey Jones has no position in any of the shares 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.