Investing is a great way to protect your financial future and ensure economic comfort later in life. Some investments, such as Bitcoin, gold and buy-to-let, are regularly making headlines as the next sure-fire way to riches, and for a few lucky individuals this is true. But I’d guess that a higher number of stock market investors have a shot at big-time riches than their equivalents seeking wealth through these alternative routes. Investing in shares via the stock market is my preferred route to financial freedom, and today I’ll explain why.
Why I prefer investing in shares
The primary reason I like the stock market is it’s not too difficult to understand and the barriers to entry are few. Nowadays anyone can start investing in shares with a small amount of cash. Brokers like Hargreaves Lansdown offer regular investment from as little as £25 and have thousands of equities to choose from. Of course, to be a serious long-term investor aiming for over a million pounds takes more foresight and focus. But this is still not off-limits to ordinary investors. In fact, many individuals have become ISA millionaires by learning, following some rules and taking a lifelong approach to their investing strategy.
Bitcoin, gold and buy-to-let barriers
I don’t have a problem with bitcoin, gold or buy-to-let, in fact I think each of them makes a great addition to a well-diversified portfolio. But I still prefer shares overall. Bitcoin is not the easiest asset for retail investors to get their heads around. It takes a lot of studying to understand its place in the economic landscape and its route to future value. Getting set up to buy or sell Bitcoin is not as straightforward as setting up a traditional ISA or SIPP. And once you’ve bought Bitcoin, you’re strongly advised to move it to cold storage (a physical USB device), to avoid hacking attempts. This is understandably off-putting to many investors.
Meanwhile, gold also requires physical storage and to buy a reasonable amount requires quite a large financial outlay. Buy-to-let absolutely requires a large financial contribution, along with oversight and organisation. It’s not a hands-off investment, even if you use an agency to deal with most of the caretaking. There will still be questions you have to answer and problems to take care of. Whereas investing in shares requires as little or as much time as you’re willing to devote.
The road to riches
With Covid-19 continuing, job losses mounting, and the US election looming, there’s great uncertainty over which direction the value of any investments will go in, including the stock market. However, as a long-term investor, a market crash provides a fantastic opportunity to buy cheap shares in companies you believe will survive and thrive. I think the key to successful stock market investing is to choose your stocks wisely. Take the time to research the company, to understand its business, its financials, and whether it’s got an edge on its competition. When you find suitable companies to buy shares in, this can set you on the road to future riches with confidence. It’s been shown that long-term investors can make an average return of 8%-10% per year from buying and holding UK shares for 10 years or more. Over time, this can build into a substantial sum of money.
Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.