Bitcoin may be flying right now, but I’d still rather buy bargain FTSE 100 shares instead. That’s despite Bitcoin more than doubling this year to $15,418, at time of writing, a three-year high. In marked contrast, the FTSE 100 is down about 20%, to trade at the same level as in June 2016. Am I backing the wrong horse?
Unlike some investors, I don’t scorn Bitcoin. I’ve a small holding in my portfolio, bought when it traded below $1,000. Naturally, I’m kicking myself for failing to buy more. I compounded that error by making the mistake of selling half my stake at a much lower price than today. Yet I’d rather load up on bargain FTSE 100 shares right now.
Bitcoin is a hugely volatile investment and nobody knows what drives its price movements. The theory this time is that it’s benefiting from US dollar weakness during the presidential election. That would explain why it’s falling today, as the result seems clear.
I’d rather buy bargain FTSE 100 shares
Another theory is that it’s benefiting from mainstream companies such as PayPal’s plans to allow its 346m customers to buy, sell, and hold Bitcoin. Then there’s our old friend, fear of missing out, or FOMO. There’s a good chance Bitcoin could surpass its December 2017 high of $20,000, which is why I’m not selling my remaining holdings.
I’d even consider adding to them, but not at today’s price. The time to invest in volatile assets like this is when the price is down, rather than up. Otherwise you could make a massive loss when it falls back. Right now, the FTSE 100 is packed with bargain shares, and that’s where I’d focus my firepower.
The index is climbing today, to hover around the 6,000 mark. I don’t think I’ve missed out on my chance to buy bargain FTSE 100 shares though. Everywhere I look, I can see top companies trading at bargain prices, thanks to the stock market crash.
I’d consider these UK shares over Bitcoin
I’m thinking of fund manager M&G, available at just 3.9 times earnings. Insurer Aviva, telecoms firm BT Group and tobacco giant Imperial Brands are only marginally more expensive, at around 4.5 times earnings.
Legal & General Group and Royal Dutch Shell are on sale for 6.5 times earnings. These FTSE 100 companies all face challenges, but they’re reflected in today’s bargain share price valuations.
Stock markets are likely to remain volatile (although not as volatile as Bitcoin). US electoral volatility may ease, but we still have Covid-19 and, of course, Brexit. So there’s a danger we could see another stock market crash.
When looking for bargain FTSE 100 shares, I’d focus on those with healthy balance sheets, minimal debt, steady revenues and, if possible, generous and continuing dividends. I might dabble with Bitcoin, but the majority of my long-term wealth is still going into UK shares.
You could start with this one.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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.