Do you believe the stock market is volatile? And does it scare you? If yes, I’d urge you to follow the prices of cryptocurrencies, including Bitcoin. An internet search would bring up stomach-churning price charts that really are scary!
That’s why I think average retail investors who plan long-term for comfortable retirements will be better off investing in stable FTSE 100 or FTSE 250 companies, rather that buying into Bitcoin for an adrenaline rush.
Where the Bitcoin price is now
Every time I look at at a Bitcoin price chart, I immediately notice continuous peaks and troughs as well as choppiness. In other words, soon after it looks like it’s ready to make new highs, the price plummets.
For example, in 2017, the price soared from under $1,000 to nearly $20,000. But it then fell below $7,000. By November 2018, it was below $4,000. Then in June 2019, Bitcoin was over $10,000.
But in early January 2020, Bitcoin was back around $7,000. As broader stock markets began falling in February, Bitcoin hovered around $9,000. By mid-March, it dropped to the $5,000 level.
As global stock indices and individual share prices began recovering from their multi-year lows at the end of March, the Bitcoin price also began an ascent. On 8 May, it was shy of $10,000. But on 13 May, as I write, it is hovering around $8,780.
Amid such wild price swings, the debate over the value and the future of many cryptocurrencies rumbles on. But clearly, investing the hard-earned cash (that you want to grow for retirement years) in Bitcoin is not for everyone.
Blockchain technology is here to stay
But there’s a way to have the best of both worlds through buying blockchain-relevant shares. Cryptocurrencies are based on blockchain technology, which can be described as a digital ledger, acting like a spreadsheet. In the future, blockchain applications are likely to have an increased impact on agriculture, asset management, insurance, healthcare, retail, and supply chain management, to name a few areas.
Therefore for retail investors, companies that work with blockchain technology may be appropriate businesses to do due diligence on. Their shares may potentially be worthy additions to long-term portfolios.
For example, the Energy Web Foundation is working with energy giants, including BP, Centrica, and Royal Dutch Shell, to explore how blockchain technology can be used in the energy sector.
Several big pharma companies, such as AstraZeneca and GlaxoSmithKline, have been collaborating to promote and cut the cost of drug discovery through increased use of blockchains.
Some global banks, including HSBC Holdings, Lloyds and Santander, are researching the potential use of blockchain-based banking solutions.
Grocery stores and food manufacturers, such as Sainsbury’s and Unilever, are exploring how blockchain could help them keep track of food in the supply chain.
Put another way, I expect to hear the word ‘blockchain’ more often in the near future. And I expect many FTSE 100 and FTSE 250 companies to embrace this new technology.
Investing in FTSE shares
My Motley Fool colleagues regularly cover FTSE shares and funds that you could consider adding to a diversified retirement portfolio. They point out that the despite various downturns and even crashes, over the long run, stock markets in the UK return about 6% to 8% annually, on average.
Research also shows that investors who purchase dividend-growth stocks and reinvest the dividends to buy more shares are likely to see considerable growth in their savings.
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tezcang has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group. 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.