The Motley Fool

Don’t gamble on Bitcoin. I’d aim for a million like this

Image source: Getty Images.

The performance of Bitcoin’s price this year may have convinced some investors the cryptocurrency is worth buying. Indeed, since the beginning of 2020, the value of the crypto asset has increased by around a third. That’s compared to a double-digit loss for the FTSE 100 over the same period. 

However, while Bitcoin has been a good investment in 2020, I think investors would be better off buying stocks for the long term. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Bitcoin vs equities

In my opinion, there are three main reasons why stocks and shares a better investment than Bitcoin. 

First of all, the crypto asset has no underlying fundamental value. That means it’s difficult to figure out how much the currency is worth. Businesses, on the other hand, produce cash flow, which is easier to evaluate. 

Second, cryptocurrencies can be difficult to buy and sell. What’s more, many of the brokers offering access to these products aren’t regulated. This could mean that if investors run into trouble buying or selling Bitcoin, they’re on their own. 

Third, security has been an issue. Hundreds of millions of dollars of Bitcoin have been stolen over the past few years. As there are no protections in place for investors. More often than not, a security breach will leave an investor with nothing. 

In my opinion, all of the above are reasons to avoid the cryptocurrency. By comparison, every stockbroker has to register with the Financial Conduct Authority in the UK. Investors are also protected up to a certain amount if the institution becomes insolvent. 

Creating value 

Stocks and shares also have a longer track record of creating value for investors. For example, over the past 120 years, UK stocks have produced an average annual return of around 7%. It doesn’t seem unreasonable to say this trend could continue. 

At this rate of return, I calculate it would be possible to turn an investment of £100,000 in £1m in 33 years. Due to the unpredictable nature of Bitcoin, I don’t think investors could achieve the same kind of return with the crypto asset. 

Acquiring a diversified basket of blue-chip stocks could be the best way to achieve this return. Companies such as Reckitt Benckiser and AstraZeneca provide diversification with their global sales base. They also offer investors a regular dividend yield. That’s another positive quality stocks provide. Many public businesses pay a regular dividend to investors, but more often than not, Bitcoin owners have to pay to store their crypto coins. 

So, that’s why I would own stocks and shares over Bitcoin to make a million. However, there’s no denying Bitcoin has been a good investment in 2020. So if you want to take advantage of this, I think limiting the holding to just 5% of a portfolio could be a sensible strategy. This would allow you to profit from any future upside while minimising downside potential.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.