The recent market crash has led many UK shares to trade at low price levels. At the same time, Bitcoin has surged higher, gold has reached a record high, and house prices are at all-time record levels.
However, FTSE 100 and FTSE 250 shares could produce higher returns than those three assets in the long run. Their low valuations and recovery potential could make them a more attractive means of retiring with financial freedom.
Relative appeal of UK shares
While UK shares have undoubtedly experienced a difficult period in 2020, their prospects could be more attractive than those of Bitcoin, gold, and buy-to-let property.
For example, Bitcoin lacks fundamentals that can be used to assess its appeal. This means investors can’t determine the price at which it offers good value for money. As such, buying it is likely to be a very risky strategy, as investor sentiment towards the virtual currency can change sharply in a short space of time.
Similarly, gold may not be able to sustain its recent gains. Low interest rates and an uncertain economic outlook have pushed its price higher. But as investor sentiment towards riskier assets improves over time, demand for gold could moderate. This may send its price lower.
Meanwhile, UK shares may also offer a better risk/reward investing opportunity than buy-to-let property. House prices could become unaffordable for many buyers at a time when unemployment is likely to rise. As such, the capital growth potential from becoming a landlord may be limited – especially as temporary measures such as the stamp duty holiday come to an end.
Long-term growth potential
With many UK shares currently trading at low prices, now could be the right time to invest in them. In many cases, FTSE 100 and FTSE 250 companies have solid financial positions, long-term recovery potential, and sound overall strategies that could push their profits higher. This may lead to rising valuations and share prices.
Furthermore, the stock market has a long track record of delivering high returns. It may currently feel as though a fall in share prices is more likely than a rise due to the uncertain economic outlook. However, it was the same after recent bear markets such as the global financial crisis. Investors who purchased stocks when they were cheap on those occasions are likely to have benefitted from the stock market’s eventual recovery.
Clearly, UK shares could experience a challenging near-term future. Therefore, it’s important to take a long-term view of their prospects. However, with many investors planning for retirement likely to have a long-term time horizon, now could be the right time to buy a diverse selection of FTSE 100 and FTSE 250 shares.
Over time, they could deliver much higher returns than Bitcoin, gold, and buy-to-let properties.
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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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