An old friend of mine would always comment that in financial markets, volatility represents opportunity. By buying and selling on these occasions, you can enhance your profits as an investor. But when looking at three assets (Bitcoin, property and FTSE 100 growth stocks), one is a clear winner when it comes to where I’ll be investing.
Ultimately, the aim from my investments is to generate enough profit to help me to retire early. This should allow me to spend more time reducing my golf handicap, along with other hobbies and pastimes. So what’s the best allocation to help me to do this?
Bitcoin certainly has the ever-present volatility that my friend spoke of. Daily swings of 5% or higher are not uncommon. But investors should appreciate that generating profits for early retirement is something that takes years, and so short-term trading of Bitcoin doesn’t fall into this category. Further, those looking to invest in Bitcoin need to be aware of potential security risks linked to who they buy it through and how it’s stored.
From the short-term trading of Bitcoin, buy-to-let investing is at the other end of the scale. Rental yields can be in excess of dividend yields on stocks, with 7%+ not uncommon in some areas. But the long-term and illiquid nature of property investing makes it hard to justify a large investment, I feel. If you’re wanting to cash in and settle up for early retirement, it could take a year or more to sell a property. This doesn’t make it ideal.
FTSE 100 growth stocks
This is where I think the true value lies. It combines a mix of the above two timelines, in that investing in a growth stock should be a plan for a few years. Growth stocks aren’t designed to be traded on a daily basis (and we certainly don’t advocate day-trading here at The Motley Fool). But they also don’t need to be held for multiple decades.
Growth stocks are those the market believes have strong potential to see their share prices heading upwards. This is due to natural expansion, investing in new technology, or merging/acquiring businesses to move into new markets. Some good examples that I’d be looking at are Ocado and Flutter Entertainment. Ocado can be seen as a long-term rival to traditional supermarkets, while Flutter is a good example of expanding into new geographies.
The reason these stocks can offer good value for someone like myself who wants to retire early is the long-term focus. Flutter was recently in the news regarding a merger with Stars Group. This should offer long-term benefits for both firms for years to come. So the potential growth in the share price is high as these types of firms are not only looking to maximise profit right now. A short-term determination to boost profits today can often damage the potential for larger profits in the future. The fact that Flutter is not taking this short-term approach should give investors confidence.
So for a medium-term investment for retirement planning, FTSE 100 growth stocks seem the right balance to me when looking at the risk against reward for different assets.
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Jonathan Smith does not own shares in any firm mentioned. The Motley Fool UK owns shares of Flutter Entertainment. 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.