With the stock market crash causing share prices to plummet across the board, many investors have been tempted to look elsewhere to build wealth.
Over the past month, the price of Bitcoin has surged by around 27%, massively outperforming the FTSE 100 index. Although I expect this could continue over the short term, in the long run, I think cheap FTSE 100 stocks offer a better, and much safer, prospect of wealth creation.
When share prices are especially volatile, it can be easy to start doubting the stock market’s ability to bring long-term capital growth. But don’t lose heart, the market always recovers and more often than not, rebounds to make new highs.
The appeal of cryptocurrencies
Much of the attention that virtual currencies receive is around their supposed ability to make you money quickly. I’m sure you’ve heard the stories of people becoming millionaires practically overnight from their savvy investments in Bitcoin.
Though this is entirely possible, it’s also true that you could lose that money just as quickly as you gained it. Exponential increases and decreases in the span of just weeks or months are a regular occurrence in crypto markets.
A quick glance at Bitcoin’s price chart illustrates this strikingly. The volatile swings upwards and downwards demonstrate a price that is purely based on investor sentiment, rather than any form of intrinsic value.
Truth be told, it’s impossible to determine Bitcoin’s prospects. In my view, its potential to replace traditional currencies seems low. To ever be used on a large scale, an overhaul of monetary systems around the world would be required.
Ultimately, spending money on a speculative asset doesn’t appeal to me. I think there are better ways to get rich and retire early.
Cheap FTSE 100 shares
Speaking of which, I think investing in cheap FTSE 100 shares offers the prospect of financial freedom over time.
The stock market sell-off has left many FTSE 100 shares trading below their historic average valuations. As well as indicating a wide margin of safety, I think this presents an ideal opportunity for investors to grab a few bargains.
In my eyes, there’s a large amount of choice regarding cheap FTSE 100 shares at the moment. Personally, I’m keeping my eye on a handful stocks. These include Taylor Wimpey, Imperial Brands Group, Unilever, Aviva, and Royal Dutch Shell.
Opportunities to buy cheap shares are usually few and far between for investors. The last time a sell-off happened on a similar scale was during the aftermath of the 2008 financial crisis. With that in mind, I wouldn’t pass up on the offer of buying bargain shares today.
Hold for the long term
Once you’ve cashed in on some cheap FTSE 100 shares, I recommend holding them for the long term. Investors who do so almost always fare better than investors who try to time the market and make a quick sale.
Moreover, riding out the temporary market downswings usually generates better returns over the long run. Remember, selling low crystallises a loss. Whereas, holding for the long term allows time for the market to recover and for your investments to bounce back.
Ultimately, I think buying cheap FTSE 100 shares and holding them for the long term is a superior way of boosting your chances of getting rich and retiring early.
Matthew Dumigan has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Imperial Brands. 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.