The recent stock market crash means that there are many bargain UK shares currently on offer. Certainly, they may not necessarily benefit from a market rebound in the short term due to ongoing risks such as the threat of a second wave of coronavirus. However, indexes such as the FTSE 100 and FTSE 250 have solid long-term recovery potential.
Undervalued stocks could offer a superior risk/reward opportunity compared to popular assets such as Bitcoin. The virtual currency’s lack of fundamentals and its regulatory risks mean that purchasing cheap FTSE 100 and FTSE 250 stocks in a Stocks and Shares ISA could be a better means of improving your retirement prospects.
Bargain UK shares
The threat of a second market crash means that there continue to be a wide range of bargain UK shares on offer. Of course, it is only after a market rally that investors know whether a stock ultimately proves to offer good value for money. However, the valuations of many stocks at the present time suggest that a large number of them are likely to fall into that category.
For example, a variety of companies currently trade on valuations that are significantly below their long-term averages. This suggests that investors are pricing in the prospect of a further market crash, and that they offer wide margins of safety.
Over time, the discount to intrinsic value available on UK shares could narrow as the economy’s performance and investor sentiment gradually improve. Although this prospect may seem somewhat unlikely at the present time, the scale of monetary policy stimulus being enacted in major economies means that a return to asset price growth is relatively likely over the coming years.
Bitcoin’s uncertain outlook
While UK shares face an uncertain future, their long-term prospects appear to be more favourable than that of Bitcoin. The virtual currency faces competition from other cryptocurrencies that could reduce demand among investors, while regulatory risks have the potential to curb its price rise following a decline earlier in the year.
Moreover, Bitcoin lacks fundamentals. As such, while investors can deduce that many FTSE 100 and FTSE 250 shares are currently undervalued from analysing their data, it is impossible to know whether the virtual currency is cheap or expensive. As a result, it could prove to be a very risky asset to hold – especially for investors who will one day rely on their portfolio to produce a passive income in retirement.
Therefore, buying a selection of bargain UK shares from across the FTSE 100 and FTSE 250 could be a better idea than purchasing Bitcoin. Their recovery potential and exceptionally low valuations in some cases could lead to impressive returns that improve your financial prospects and help to bring your retirement date a step closer.
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.