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Forget buy-to-let, gold and Bitcoin: I’d buy cheap FTSE 100 stocks in this market crash

Assets such as gold, Bitcoin and buy-to-let properties may seem to be more appealing than FTSE 100 stocks after the recent market crash. However, the income opportunities, low valuations and recovery potential on offer across the FTSE 100 could make it a more attractive investment option for long-term investors.

As such, now may be the right time to buy a diverse range of large-cap shares and hold them over the coming years. Doing so could strengthen your financial prospects.

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Valuations

The FTSE 100’s decline in the first part of 2020 means many of its members now appear to offer excellent value for money. In many cases they may experience challenging financial prospects that cause their sales and profitability to come under pressure. However, the past performance of the index suggests that valuations eventually return to the long-term average. This could lead to strong recovery potential from the index.

By contrast, buy-to-let properties appear to be overpriced in many cases. Yes, falling interest rates may offer some support to the industry. But a period of weaker economic growth may produce subdued rental growth for landlords. The affordability of property compared to average incomes has been low for many years. This could mean that capital growth across the housing industry is somewhat limited.

FTSE 100 income opportunities

Some FTSE 100 companies have announced a suspension of their dividends due to coronavirus. But the index as a whole continues to offer relatively high income return prospects. Some companies, for example, are likely to maintain their dividends. Others that have reduced them may produce strong dividend growth as the economy recovers. This could make them attractive long-term income opportunities at a time when interest rates are at historic lows.

Buying gold may seem like a worthwhile move to many investors. But its lack of income return may mean that it has limited appeal for investors who are seeking to generate a passive income from their capital. Moreover, gold is trading close to a record high. This could mean that investors buying it now have limited scope to generate capital growth over the long run – especially since investors may become less risk-averse and could decide to purchase risky assets over the coming years.

Recovery potential

The track record of the FTSE 100 shows that it has always recovered from its very worst bear markets. A similar outcome may not seem likely now, but over the coming years the index looks set to generate new record highs. As such, buying cheap FTSE 100 shares today could be a profitable move.

Meanwhile, Bitcoin could experience a difficult period over the coming years. Its regulatory risks could hold back investor sentiment, while its limited size may inhibit its capacity to replace traditional currencies. This may mean that bargain FTSE 100 shares offer superior risk/reward opportunities compared to the virtual currency.

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Peter Stephens 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.