Buying cheap UK shares regularly may not seem to be a sound means of making a million. That’s especially the case after the recent market crash, and with there being a number of risks that could cause a further downturn in share prices.
However, by investing in high-quality businesses regularly through a tax-efficient account such as a Stocks and Shares ISA, you could obtain a seven-figure portfolio. As such, it may be a better option than buying Bitcoin at the present time.
Regular investing in UK shares
Investing regularly in UK shares could lead to surprisingly large returns in the long run. The FTSE 250, for example, has returned around 8% per annum over the past 20 years on a total return basis. Therefore, through buying small amounts often, you could benefit from the long-term growth potential of the stock market.
For example, assuming an investment of £750 per month in the FTSE 250 that generates 8% per annum over a 30-year period, you could have a portfolio valued at over £1m. Certainly, between now and the end of that period there are likely to be a number of bear markets that cause the value of your portfolio to decline temporarily. However, history shows that the stock market has always recovered from even the very worst declines. As such, by maintaining regular investments in UK shares, you could build a surprisingly large nest egg.
Buying high-quality stocks at bargain prices
Buying high-quality UK shares at cheap prices could be a means of obtaining even higher returns in the long run. At the present time, a number of strong businesses that are dominant in their industry are trading on low valuations due to the potential for a second market crash. This has caused weak investor sentiment that may enable you to obtain wide margins of safety that lead to more impressive capital gains in the long run.
Certainly, there is a chance that buying shares today will lead to paper losses in the short run due to the risks facing UK investors. However, a second market crash could be beneficial to regular investors with long-term outlooks as it will allow you to buy high-quality businesses at even lower prices to gain even further from a likely recovery for UK shares.
Bitcoin’s recent rising price understandably makes it seem attractive to investors who are doubting the prospects for UK shares. However, the stock market has been in similar situations previously, and has proven to be a reliable means for many investors to build £1m+ ISA portfolios.
Furthermore, with Bitcoin lacking fundamentals, facing regulatory risks and being of a limited size, its long-term prospects appear challenging. As such, now could be the right time to start buying high-quality FTSE 100 and FTSE 250 shares to benefit from the stock market’s long-term recovery potential.
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.