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FTSE 100 The stock has had a few tough years, but I think now is a great time to buy it because it's cheap and offers fantastic dividends. They seem to me to be a potentially much better way to generate wealth than the bitcoin cryptocurrency.
This may seem strange, given that the FTSE 100 is up just 2.5% in 2023, while bitcoin has soared 150%. Cryptocurrency traders have high hopes for 2024, as they await US regulatory approval for spot bitcoin ETFs and the bitcoin halving in April.
The former should boost demand, the latter should reduce supply. Together, they could put a rocket under bitcoin (although I suspect much of the good news is already priced in).
<h2 class="wp-block-heading" id="h-uk-stocks-are-my-choice”>UK stocks are my choice
Bloomberg estimates that bitcoin will exceed $50,000 in 2024. Chartered Standard predicts $100,000. Matrixport predicts $125,000 and BitQuant estimates something up to $250,000. Me too? I have no idea.
I also have no idea where the FTSE 100 will end up in 2024. Although I know it won't make me a fortune overnight. And that's fine.
I'm building a portfolio of FTSE 100 shares, ideally to build solid long-term wealth. I have primarily focused on high-yield dividend stocks, which are trading at low valuations. Typical holdings include Lloyds Banking Groupwealth manager M&G and house builder Taylor Wimpeywhich I bought during the summer and fall.
All three were valued at less than 10 times earnings when I bought them, with yields of 5%, 7% and 9%, respectively.
So far, its shares are up 15% to 20%, despite last week's drop. Naturally, past performance does not guarantee future results. I've already reinvested my first dividends, and if I'm lucky, there are many more in the pipeline (dividends are not guaranteed).
My plan is to hold the stock – and many others like it – for years, decades and, ideally, for life. While I work I will reinvest all dividends and when I stop working I will ideally aim to withdraw them as income to supplement my pensions.
By investing in a stocks and Shares ISA, all that income will be tax-free for life. While crypto profits are subject to capital gains tax.
It's the income I'm looking for
Please note that tax treatment depends on each client's individual circumstances and may be subject to change in the future. The content of this article is provided for informational purposes only. It is not intended to be, nor does it constitute, any type of tax advice. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.
I wouldn't want to rely on bitcoin to fund my retirement. First, it is incredibly volatile. Nobody knows what it's worth from one day to the next. Secondly, it does not generate any income. My FTSE 100 shares give me an average return of 7%, plus any share price growth.
FTSE 100 shares can also be volatile, but that could work in my favour. If, say, Taylor Wimpey shares collapse, my reinvested dividends will buy more shares at the lower price. I could also take advantage of the drop in prices to increase my holdings. Then I will sit still and wait for the probable recovery. Again, there are no guarantees. That's why I will spread my risk by buying around 15 stocks in different sectors.
I have one bitcoin (and a pinch of ethereum) and have no plans to sell it in case the price hits $100,000 (or $250,000!). Could occur. But at today's price I won't buy more. Instead, I'm taking advantage of a busy January to buy more FTSE 100 shares at the lowest price and potentially generate even more dividend income for my retirement.
