Just look at Bitcoin go! At time of writing, the price is closing in on $10,000, as investors treat it as a safe haven amid growing coronavirus concerns. A year ago it traded at just over $3,000, so those who bought then have more than tripled their money.
My worry with Bitcoin is its immense volatility. You could invest £1, £5k or £10k at today’s price, and have absolutely no idea what your money will be worth in a week or two. Worse, the higher the entry point, the greater your potential losses, so approach with caution.
Make a million
If you want to make a million and retire in comfort, I would recommend you ignore Bitcoin and invest free of tax inside a Stocks and Shares ISA instead. Naturally, you won’t triple your money in a year, but the stock market can also turn small sums into very big ones.
I was reminded of this yesterday, when I received an email saying I had just earned the princely sum of £20.06. That still leaves me £999,979.94 short of a million, but it is going to get me there, eventually.
That £20.06 is just over double the hourly minimum wage, yet I didn’t have to put in two hours work to generate it. It was sent free by my online trading platform, in the form of a dividend payment from the BlackRock Latin American Investment Trust, in which I now hold £1,592.20.
Roll up! Roll up!
It isn’t a one-off. In November 2019, the trust paid me £18.55. In August, £23.15. In May, £18.04. In February, £14.34. In total, it paid me £74.08 last year. For doing nothing.
It will do the same in 2020, in 2021, 2022, and beyond, for as long as I hold the fund. Over the years, this money will add up.
I bought the fund 15 years ago, originally investing £489,33. It has delivered a total return of 225% since then, with capital growth and reinvested dividends. If it does the same over the next 15 years, then my stake will be worth £5,174.65.
Imagine if I’d invested £5k. Then it would grow to more than £50k.
This isn’t the only dividend payment I received in January. Another holding, HSBC All-Share Index, paid me £69.06, again, for doing nothing. Scottish Oriental Smaller Companies investment trust handed me £61.07. There were plenty of other payments and I don’t have to pay tax on any of them, inside my ISA.
If you build a balanced portfolio of dividend-paying shares and funds, people send you money for free. It may not be much at first, but it will roll up, especially if you reinvest the money to buy extra stock or units (which will pay even more dividends).
Over the years, all these payments will grown into something substantial. They could even help you build a £1m portfolio.
So think twice about rushing into Bitcoin, whose price could go anywhere. Stocks and shares give you a much surer chance of retiring in comfort and style.
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Harvey Jones holds investment funds BlackRock Latin American, HSBC FTSE All-Share and Scottish Oriental Smaller Companies, but no other share mentioned in this article. 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.