Bitcoin has followed its 90%+ rise in 2019 by recording growth of 25% since the start of the year. That’s an impressive rate at a time when the stock market has experienced a challenging period due to the risks posed by coronavirus.
Looking ahead, further growth in the virtual currency wouldn’t be a major surprise in the short run. However, in the long run, the stock market may offer a better means of improving your financial position to retire early. As such, investing £10k, or any other amount, in shares could be a more logical move than buying Bitcoin.
The surge in Bitcoin’s price doesn’t provide any indication whether the virtual currency offers good value for money or not. Its lack of fundamentals means investors have no data through which to make a decision on the potential value of the cryptocurrency, and whether it’s worth buying at its current price level.
As such, buying Bitcoin is a risky move. In addition, other virtual currencies could gain in popularity over the coming years. This could reduce demand for Bitcoin and lead to a more challenging outlook for its price. And, with regulatory risks omnipresent, the performance of the virtual currency could quickly change without notice.
Stock market risks
Of course, the stock market also faces an uncertain future. As mentioned, the threat posed by coronavirus to the world economy is difficult to quantify at present. This may mean investors adopt a cautious stance on the prospects for global growth.
Additionally, the FTSE 100 and FTSE 250 have enjoyed decade-long bull markets. History shows that no bull run has lasted in perpetuity. Therefore, a bear market is likely to be ahead, and could be prompted by risks such as political uncertainty in the US and Europe, as well as geopolitical risks in the Middle East.
However, the current risks facing the stock market could represent a buying opportunity for long-term investors. The FTSE 100 and FTSE 250, for example, currently trade on highly attractive valuations, with many of their members having ratings significantly below their long-term averages.
Furthermore, with the indexes having always recovered from their downturns to post record highs, buying during periods where risks are heightened has historically been a successful investment strategy.
Since many companies are expected to post improving levels of profitability in the coming years, their current valuations appear to be attractive. Their prices may move lower in the short run, but building a portfolio of undervalued stocks right now could increase your chances of retiring early.
Shares may not offer the same level of excitement as Bitcoin, but they appear to offer a more favourable risk/reward ratio that has a higher chance of delivering strong total returns for your initial investment over the coming years.
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.