Despite the FTSE 100’s recent market rebound, many of its members continue to trade at low price levels after experiencing a market crash earlier this year. As such, there continue to be cheap shares on offer within the index that could deliver high returns over the long run.
Although Bitcoin’s price has rebounded much faster than that of the FTSE 100, the virtual currency faces numerous risks that could negatively impact on its performance over the long run.
Therefore, buying a range of cheap large-cap shares today and holding them for the long term could be a better strategy for investors who are seeking to make a million.
Cheap FTSE 100 shares
Many of the FTSE 100’s sectors are currently unpopular among investors. For example, a large number of retail stocks offer wide margins of safety, while sectors such as banking, travel and leisure, as well as resources companies currently trade on low valuations.
In the near term, those sectors and the rest of the index could experience disappointing performances. After all, the world economy is likely to undergo a period of slower growth as the full impact of coronavirus becomes clear.
However, over the long run, the world economy is set to recover. Buying high-quality businesses while they offer good value for money could be a means of capitalising on that growth potential through accessing favourable risk/reward ratios across the index.
Such a strategy has been successful following previous FTSE 100 bear markets. The cyclicality of the index means that purchasing a diverse range of businesses at low prices can be a sound means of obtaining above-average returns over the long run, which could boost your chances of generating a seven-figure portfolio.
Although the Bitcoin price has nearly doubled since its March lows, its long-term prospects remain unclear. Factors such as its limited size, lack of infrastructure and regulatory risks could derail its progress. And since its price level is based on investor sentiment rather than fundamentals, a rapid change in investor views on the cryptocurrency could lead to significant volatility in its performance.
Certainly, virtual currencies could eventually replace traditional currencies in the long run. But from an investment perspective, the risk/reward opportunity on offer from Bitcoin means that it may not be a worthwhile investment relative to the FTSE 100 at the present time.
Making a million
Of course, the FTSE 100 may experience further challenges in the short run. Its previous recoveries from bear markets have often taken a number of years, with mini-rallies often leading to frustration and disappointment among investors.
However, the index’s track record of recovery and its low price levels at the present time suggest that it offers a sound means of generating high returns over the coming years. In doing so, it could increase your chances of making a million.
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.