Investing is all about making choices and for me, UK shares are far more attractive way to build long-term wealth than gambling on Bitcoin or bothering with buy-to-let.
If I was 40 and had no savings to my name, apart from a bit of cash in the bank for emergencies, I’d make building up wealth for my retirement a financial priority. Once I’d paid off expensive short-term debt such as any credit card bills, I’d get stuck into investing.
A little bit too volatile
Cryptocurrency Bitcoin tempts some, but not me. Yes, the price has rebounded 60% this year to around $27,000, I don’t feel I can build my future on it. It’s just too volatile. I’m not convinced by the end user case, either. One day, Bitcoin could collapse to zero.
There’s a chance it could prove its worth and the price could hit $1m as some traders claim. I’d like to have a tiny bit of exposure in my portfolio just in case, but most will be in UK shares.
I’ve been tempted by buy-to-let over the years too, but not today. The big advantage of investing in property is that I can leverage by borrowing to invest. However, finding a property, doing it up, paying a heap of stamp duty, then dealing with tenants sounds too much like hard work.
Now could be a good time to invest in bricks and mortar as house prices fall. But the income from a rental property is taxable, as is capital growth from rising house prices. By comparison, any UK shares I buy inside a Stocks and Shares ISA are completely free of tax. I don’t even have to mention them on my self-assessment return.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
I’m much more excited about buying shares, as there are loads of top value stocks on the FTSE 100 today. Better still, as well as being cheap to buy, many offer me amazing dividend yields.
While Bitcoin pays no income and buy-to-let rentals yield around 5% to 6%, housebuilder Taylor Wimpey gives me income of 8.01% a year, currently.
Loads of top tax-free yields
Alternatively, I could invest in mining giant Rio Tinto, which yields 8.4% a year. Meanwhile, Legal & General Group yields 8.5%, and fund manager M&G yields 10.21%.
Better still, after the recent dip in share prices, they look cheap. Taylor Wimpey trades at just 6.2 times earnings (15 times is traditionally seen as fair value). Rio Tinto (7.1 times), L&G (5.9 times) and M&G (11.6 times) also look cheap. That income is free of tax inside an ISA.
Shares have risks too, of course. As the global economy struggles, stock markets could fall further. High yields often prove unsustainable, and those dividends could be cut, at any time. Any of my stock choices could underperform the market, even in a recovery.
But I would reduce the potential downside by building a balanced portfolio of around a dozen UK shares over time, with the aim of holding them for the long term. At 40, retirement will be at least 25 years away. That gives my portfolio plenty of time to grow, with dividends reinvested.
The post No savings at 40? I’d ignore Bitcoin and buy-to-let and invest in cheap UK shares appeared first on The Motley Fool UK.
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The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Harvey Jones has positions in Legal & General Group Plc, M&G Plc, and Rio Tinto Group. He also holds 0.85 BTC. The Motley Fool UK has recommended M&g Plc. 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.
Motley Fool UK 2023
