I think now’s a great time to buy cheap FTSE 100 shares. But plenty of people disagree and are rushing into crypto-currency Bitcoin instead. The price has just topped $10,000, sparking a rash of publicity, as it always does when it smashes through some symbolic number.
The FTSE 100 is flirting with its own symbolic number, hovering just above 6,000. If it falls through that, we can expect yet another rash of gloomy headlines. In both cases, you need to look beyond the short-term hype, and consider the long-term advantages of investing in these two very different asset classes.
The FTSE 100 looks cheap right now, trading almost 20% below its January high of 7,674. There’s a reason for that. The UK’s GDP plummeted by an unthinkable 20.4% during April’s lockdown, the largest fall since monthly records began 23 years ago. The recovery has begun, but it’ll be slow, amid nervousness and confusion about social distancing rules.
You can keep your Bitcoin
Dozens of companies on the index have cut or suspended their dividends. Profits have plunged. Certain sectors, notably travel and entertainment, face an existential crisis. Yet history shows it’s at times like these investors enjoy the greatest opportunities.
In a crash, financially sound companies get sold off along with the strugglers. There are cheap FTSE 100 shares all over the place. Some of these companies may take a short-term hit, but their long-term future is solid.
Top UK blue-chips such as AstraZeneca, Diageo, GlaxoSmithKline, National Grid, Phoenix Group Holdings, Prudential, Rio Tinto, Unilever and United Utilities Group are just a few that spring to mind. There are plenty more out there.
Many of these continue to pay dividends. That’s not to be sniffed at, given today’s near-zero interest rates. Especially when these FTSE 100 shares are so cheap. Better still, they’re plugged into the real-world economy, and will benefit when the pandemic eases and activity picks up.
I still see little connection between Bitcoin and the real world. Has anyone yet found a unique practical use for this crypto yet? I haven’t seen it. This is a radical innovation, with no USP. It doesn’t even fill a gap in the market.
I’d buy cheap FTSE 100 shares today
Bitcoin is purely a play on its own volatility. A trader’s toy. Price movements are driven almost entirely by sentiment. The only use I can see is getting your money out of an embattled country before authorities impose capital controls, or the economy goes into meltdown.
So the news that it’s climbed above $10,000 is neither here nor there. It did the same in June last year. Everyone got excited too. I can’t, not any longer.
I’m so over Bitcoin. I prefer to buy the shares FTSE 100 companies that offer products or services real people want to buy today. Particularly when those shares are cheap, as now. This is how I plan to build my wealth for the future.
Not by gambling on Bitcoin.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo, GlaxoSmithKline, Prudential, and Unilever. 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.