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Danger! Why NOT investing in UK shares could stop you getting rich and retiring early

The immense volatility across financial markets makes the prospect of investing in UK shares a scary endeavour for both existing and aspiring stock investors. A recent spike in Covid-19 cases and fresh rounds of lockdowns makes many worry that this choppiness could be set to last for much longer too.

But despite this, I remain convinced investing in shares is the best way to use your cash nowadays. It’s not just that the recent stock market crash leaves plenty of UK shares looking criminally undervalued. It’s that the returns other savings and investment products offer are, frankly, pathetic.

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The Cash ISA calamity

One of the most popular products in tough economic times and high stock market volatility is the Cash ISA. At face value, it’s easy to see why. In the short term, the value of your cash in accounts like these isn’t eroded when financial markets sink. The same can’t be said for Stocks and Shares ISAs, as I can personally attest to.

However, it’s a mistake to say these products are risk free. In fact, over a long time period, products like Cash ISAs pose one of the biggest dangers to your hopes of getting rich. Why? Well a prolonged period of ultra-loose central bank policy has decimated the interest rates on offer to savers.

And, more recently, the UK inflation rate has exceeded the interest rates available on most Cash ISAs. This means the real-world value of your savings is crumbling over time.

You’re better off with UK shares!

Of course there are other ways to use your hard-saved cash. However, some of the other most popular alternatives to investing in UK shares are just as poor. Bonds offer the same sort of poor returns as Cash ISAs. Rising costs are destroying profits that buy-to-let investors can expect. And questions over the legitimacy of cryptocurrencies like Bitcoin make investment here little more than a gamble.

There’s no doubt in my mind that UK shares are still the best place to put your money to work. The financial pages might be scary today. But the social, economic, and political worries that are causing stock markets to shake right now won’t last forever.

Indeed, wise words from investing giant Warren Buffett are worth bearing in mind in times like these. “I don’t think I can make money by predicting what’s going to go on next week or next month,” the Oracle of Omaha said. But he then added: “I do think I can make money by predicting what will go on in the next 10 years.”

This is the essence of successful stock investing. You should aim to buy shares with a view to holding them for 5, 10, 20 years, perhaps longer. Over this timescale, the cream will rise to the top and a portfolio packed with top-quality companies will, in all likelihood, provide you with great returns. These sorts of investors can make an annual return of at least 8% per year, data shows.

So a well-diversified portfolio comprising of choice UK shares gives you the best chance to get rich and retire early.

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Royston Wild 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.