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Forget gold and buy-to-let. I’d buy cheap FTSE 100 stocks today to beat the State Pension

The FTSE 100 may have rebounded following its market crash, but the outlook for share prices continues to be highly unclear. Risks, such as a global economic recession and weak earnings growth prospects across many industries, may mean some investors decide to buy other assets, such as gold and buy-to-let, to build a retirement nest egg.

However, the long-term prospects for the stock market could be much more promising than investor sentiment currently suggests. Buying large-cap shares while they are cheap could help you to overcome a rising State Pension age and enjoy a growing passive income in retirement.

Buying FTSE 100 shares at low levels

As with any asset, FTSE 100 shares experience periods of growth and periods of decline. Investors who can purchase stocks when they’re relatively cheap could, therefore, position their portfolios for growth as the next bull market pushes share prices higher.

At present, a number of large-cap shares appear to offer good value for money. In some cases they trade significantly below their long-term averages, and could offer wide margins of safety.

Certainly, there are risks ahead for many industries and firms, including the giants in the FTSE 100. Consumer habits may have been permanently changed by lockdown, while weak consumer sentiment may mean demand takes some time to return to pre-coronavirus levels.

However, buying high-quality companies while there are significant short-term risks present could enable you to access lower share prices. These could provide greater scope for capital growth over the long run.

Relative potential

During a period of relatively high risks, the appeal of gold and buy-to-let property may increase compared to FTSE 100 shares. Gold, for example, has a strong track record of outperforming other mainstream assets during periods of economic uncertainty. As such, its price level has risen close to a record high in the first part of 2020.

Likewise, buy-to-let investments are often viewed as relatively low risk. Property prices have moved higher over a long time period. And they’re likely to do likewise over the coming years, due to an imbalance between demand and supply.

However, investor sentiment has always improved following economic crises in the past. that means gold’s capital growth potential may be somewhat limited. Likewise, risks, such as longer void periods and slow rental growth during a likely recession, may make buy-to-let investing less attractive than buying the FTSE 100.

Building a retirement portfolio

Buying a range of FTSE 100 shares could be a sound means of building a retirement portfolio that provides you with a passive income in older age. The index’s low level and its capacity to recover over the long run mean that it could be a sound means of overcoming a rising State Pension age.

As such, now could be the right time to purchase high-quality FTSE 100 stocks for the long term.

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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.