Every investor should build a balanced portfolio containing different assets classes, but I think you should use most of your long-term wealth to buy bargain FTSE 100 shares.
I would keep only a small proportion of my wealth in rival assets such as Cash ISAs, Bitcoin, and gold. History shows that stock markets beat almost every rival over the long run. If you want to get rich and retire early, this is where I’d start.
When you buy equities, you are investing in real life companies that produce goods and services people need and want to buy. After the Covid-19 crash, many of these companies are in trouble. Others are genuine FTSE 100 bargains, good companies whose share prices have plunged along with the bad. This is where your opportunities lie right now.
Cash ISAs, Bitcoin, and gold options
You aren’t investing in the real world when you trade Bitcoin. The virtual currency has almost no practical uses. Primarily, it is a speculative tool to keep day traders amused. Until they start losing real money, that is. Then it’s not so amusing.
Crypto-currencies are a play on volatility. Spot markets can be volatile too, but you can make that work in your favour. At the Motley Fool, we urge investors to buy FTSE 100 shares when they are trading at bargain prices, say, after a stock market crash. If you plan to hold them for the long term, you will benefit when markets recover, as they always do in the longer run.
Cash is a safe haven from volatility, but there’s a catch. Easy access savings accounts destroy the value of your money. They now pay just 0.25% on average, half today’s inflation rate. It means your money is eroding in real terms.
Everybody needs a bit of cash on easy access for emergencies, but your the money you are building into long-term wealth should go into equities. I’d start by buying FTSE 100 shares, which are particularly attractive when available at bargain prices, like today.
The stock market crash in March saw another rush into gold as a store of value. As I write this, the gold price stands at just over $1,800 an ounce, a level last seen in 2012. If it rises much more, it could top its all-time high.
Bargain FTSE 100 shares for me
I have a natural aversion to investing at the top of the market. You have missed most of the gains, and are vulnerable to a crash.
That is why I’m favouring bargain FTSE 100 shares right now. Despite the recovery, they are still down 20% from their pre-pandemic highs. If we get another crash, my advice would be the same, buy more shares at the new, lower price. Then hold them for the long term, and reinvest your dividends for growth.
You can reduce the risk by targeting companies with strong balance sheets, steady revenues, minimal debts, and strong competitive ‘moats’ against rival firms. Many still pay attractive dividend yields, something you won’t get from Bitcoin or gold.
That’s why my money is going into bargain FTSE 100 shares today.
Here are some tips to get you started.
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Harvey Jones 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.