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I’d love to make a million for my retirement. And I reckon that building a portfolio of UK shares is the best way to do it. I’m sceptical of rival asset classes such as Bitcoin, gold and cash, which lack their staying power, even though they have their own advantages.
Bitcoin was, of course, a brilliant way to make a million – about 10 years ago. I might even have made a billion or two if I had bought the cryptocurrency when it was trading at just a few cents. At today’s entry price of $40,000, it’s going to be a lot harder.
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Plenty of online fanboys claiming the Bitcoin price will hit $1m one day, but I can’t see that happening. It’s very much stuck in its trading range for now, and still lacks that killer application.
Bitcoin, gold and cash don’t excite me
I don’t think precious metal gold has much to offer my quest to make a million. I’ll admit it has had a magnificent Millennium, delivering a return of 544% over the past 20 years.
Yet lately, gold hasn’t exactly dazzled, despite all the chaos surrounding the pandemic and the war in Ukraine. Gold works best as a shock absorber in times of trouble, but I wouldn’t invest more than 5% of my portfolio in it, if that. I think today’s entry price of around $1,930 looks a bit pricey too.
Financial advisers say you should keep up to six months of income in cash on easy access, in case of emergencies. That’s a good rule of thumb, but I wouldn’t hold more cash than that, given today’s lousy savings rates.
With inflation at 7% and today’s best buy accounts paying just 1% or 2%, cash won’t make me a million. Cash is much safer than shares, but by the time it appreciates, the real value of that £1m will have been dramatically eroded in real terms.
I don’t expect to make a million overnight by investing in UK shares. It’s a long, slow process, but I still believe equities offer by the best chances of success. I’d build my portfolio around a FTSE 100 tracker and FTSE 250 tracker, to get a good spread of UK shares at minimal cost.
I’m hoping shares will make me a million
I’d also get some international exposure, investing in investment trusts or exchange traded funds (ETFs) targeting the US, Europe and emerging markets. After that, I would put my faith in individual UK shares to make a million.
I would start by investing in FTSE 100 dividend-paying blue-chips, targeting those trading on low valuations and offering high yields. I would look for companies with healthy revenues, loyal customers, strong management and heaps of resilience, to help them cope with today’s uncertainties.
Then I would start scanning the FTSE 250, to add some younger, whizzier stocks to my portfolio. That should give me the perfect balance of dividend income and capital growth. None of which I would get from Bitcoin, gold or cash.
Even if I don’t make a million, investing in UK shares could still help me retire in comfort.
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