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Forget Income Bonds, gold and Cash ISAs. I’d buy UK shares in a Stocks & Shares ISA today

The recent market crash and uncertain economic outlook may cause some investors to avoid UK shares. They may feel the short-term risks facing the stock market could worsen, as the threat of a second wave of coronavirus continues.

However, the returns available over the long run through FTSE 100 and FTSE 250 shares could be significantly higher than those of Cash ISAs, gold and Income Bonds.

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Therefore, while risks remain over the short run, now could be the right time to purchase a range of UK shares while they trade at low prices. They could lead to a surprisingly large Stocks and Shares ISA portfolio in the coming years.

Alternative options

The market crash may mean that UK shares are relatively unpopular at the present time due to their volatile outlook. However, the returns available elsewhere could be somewhat disappointing. For example, NS&I Income Bonds offer a return of just over 1%, while many Cash ISAs have interest rates that are substantially below that figure. Over the medium term, their returns may continue to be relatively low as interest rates fail to rise due to policymakers seeking to simulate the economy.

Similarly, the return prospects for gold may be more limited than many investors realise. The precious metal is currently popular largely due to the uncertain economic outlook. However, history shows that no recession has ever lasted in perpetuity. This means that an improvement in investor sentiment towards riskier assets, such as UK shares, is likely. As such, an ongoing rise in the gold price at the same pace as that achieved in the first half of 2020 seems to be somewhat optimistic.

Buying UK shares after a market crash

Therefore, buying UK shares today could prove to be a relatively profitable move. Not only do they have a strong track record of delivering high-single-digit annual returns over a long period of time, their current valuations suggest that there is significant scope for them to recover over the coming years.

Certainly, some sectors have rebounded since the FTSE 100 and FTSE 250 reached lows in March. However, weak investor sentiment towards the wider stock market means that some high-quality businesses are trading on valuations that suggest they offer wide margins of safety. Buying them now may provide scope for capital growth as they not only experience improving operating conditions, but benefit from rising investor sentiment towards equities.

With it being a cheap process to buy UK shares in a Stocks and Shares ISA, taking advantage of the stock market’s likely recovery after the market crash is something that can be done by almost any investor. Over time, the stock market could offer a significantly greater return than Income Bonds, Cash ISAs and gold, which could boost your portfolio’s returns and improve your prospects of enjoying financial freedom in the long run.

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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.

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