Unsurprisingly, the March stock market sell-off triggered a mass exodus from equities to alternative assets such as gold and Bitcoin. As market sentiment rapidly deteriorated, investors became spooked by volatile share prices and economic uncertainty. Nevertheless, I think investing in the best UK shares available on the market today still remains a superior way of building capital.
The problem with Bitcoin
The price of Bitcoin surged in the wake of the market crash. In fact, the virtual currency has vastly outperformed many stock market indexes around the world. What’s more, this could feasibly continue in the short term. Global equities look set to continue to grapple with the implications of the wider macroeconomic uncertainty.
However, let’s not forget that the price of Bitcoin plunged in tandem with UK shares in early March. From mid-February to mid-March, the cryptocurrency shed around 50% of its value. What’s more, wild downswings like this are not a rare occurrence for Bitcoin investors. Simply observing the virtual currency’s price chart tells you everything you need to know.
On top of this, I’m not convinced that Bitcoin’s future prospects are the brightest. After 11 years in circulation, the cryptocurrency is still not widely used or accepted. It seems that for now and the foreseeable future, its valuation must continue to be derived from sheer investor speculation.
Don’t get me wrong, I’m not ruling out a small allocation to Bitcoin in a diversified investment portfolio. Rather, I believe that buying a handful of the best UK shares is a superior way to build wealth. Especially over the long term.
A better alternative: Buying the best UK shares
The buy-and-hold investment strategy is a tried and tested way of building capital. Just look at the success of investing titans such as Warren Buffett, who have utilised this approach throughout their time in the market.
Here at The Motley Fool, we echo the words of Buffett in that “our favourite stock holding period is forever”. In other words, the longer you hold your investments for, the larger you can expect your gains to be. This is thanks to the wonders of compound returns, which is the snowballing effect that turns a relatively small investment into a huge sum over time. Given the average annual return of the FTSE 100 is around 8%, you have the potential to realise some pretty serious gains.
In my view, the best way to implement this strategy is by selecting a handful of the best UK shares that you’d be comfortable holding forever. For me, that means taking a closer look at companies such as Unilever, GlaxoSmithKline, and Tesco. All three of these companies have well-established market positions, stable earnings growth, and boast healthy dividend yields.
Alternatively, you may think the best investment for you would be to gain exposure to a larger amount of UK shares. If so, I recommend taking a look at a cheap UK tracker fund, such as the Vanguard FTSE UK All Share Index.
Whichever you choose, investing in equities and holding them for the long term is a far safer and superior way to build capital in my eyes. As such, I’d ensure that buying some of the best UK shares remains the top priority when it comes to growing a bulky Stocks and Shares ISA.
Speaking of the best UK shares on the market today, take a look at this...
On February 3rd, 2020, Boris Johnson made a surprise announcement…
…potentially helping to grow one little-known British company’s revenues by an expected £50million+.
You probably saw this announcement in the news. But we bet you’ve never heard of the company which we believe could profit.
Matthew Dumigan 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 Tesco. 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.