The recent market turbulence has sent investors running for cover. Safe havens, such as gold and Bitcoin, have been in demand. However, rather than rushing to buy one of these assets, I’m putting my money in the FTSE 250 instead.
Buying the FTSE 250
The problem with both gold and Bitcoin is the fact these are speculative investments. They’re only worth as much as someone is willing to pay for them. What’s more, it costs a lot to own these assets. Storage costs, as well as transaction fees, can amount to several percentage points of value every year.
You can reduce costs by owning gold and Bitcoin through funds. But what’s the point of owning a safe haven if you’re relying on someone else to manage it for you?
Meanwhile, the FTSE 250 could be a much more attractive investment over the long run.
Since its inception three-and-a-half decades ago, the index has returned around 10% per annum for investors. That’s far more than gold. Bitcoin has outperformed the index, but that’s only thanks to its explosive run in the past five years.
Going forward, it’s highly likely that this trend will continue. While it’s impossible to predict where the markets will trade over the next few weeks or months, over the long term, it’s highly likely that stocks will produce a return in line or above inflation. That’s because companies tend to increase prices with inflation.
On top of this, technological advancements should lead to more efficient operations and higher profit margins. These factors have helped the index produce a double-digit return over the past few decades.
While economic growth might come to a shuddering halt this year, over the long term, the global economy should continue to expand.
Time to buy?
Compared to owning gold and Bitcoin, it is relatively easy to hold the FTSE 250. Most online investment platforms allow investors to set up a regular plan in stocks and funds. Some of these platforms even offer discounts on funds, which means investors can pick up an FTSE 250 tracker fund today with fees of less than 0.1%.
Owning a low-cost tracker fund also reduces the risk of bad stock picking. Picking stocks can be a time-consuming and daunting process. Even the professionals get it wrong regularly.
You don’t have to worry about this with tracker funds. They’re designed the track the underlying index which, in this case, is the FTSE 250. In other words, you can acquire a portfolio of 250 companies at the click of a button without having to do any extra work.
Considering the current market environment, this could be the best option for investors who’re looking to take advantage of market volatility.
Put simply, the FTSE 250’s performance over the past few decades shows it could be a much better investment than gold and Bitcoin over the long run.
The post Forget gold and Bitcoin! I’d buy the FTSE 250 after recent declines appeared first on The Motley Fool UK.
Rupert Hargreaves has no position in any of the shares 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.
Motley Fool UK 2020