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FTSE 100 shares have had a bumpy few years but I think now is a brilliant time to buy them because they’re cheap and offer fantastic dividends. They strike me as potentially a much better way to build wealth than cryptocurrency Bitcoin.
That may seem odd, given that the FTSE 100 rose just 2.5% in 2023, while Bitcoin rocketed 150%. Crypto traders have high hopes for 2024, as they await US regulatory approval for spot-Bitcoin ETFs and the Bitcoin halving in April.
The first should boost demand, the latter should slash supply. Together, they could put a rocket under Bitcoin (although I suspect much of the good news is priced in).
UK stocks are my choice
Bloomberg reckons Bitcoin will top $50,000 in 2024. Standard Chartered predicts $100,000. Matrixport predicts $125,000 and BitQuant guesses anything up to $250,000. And me? I have no idea.
I’ve no idea where the FTSE 100 will end 2024, either. I do know that it won’t make me an overnight fortune, though. And that’s fine.
I’m building a portfolio of FTSE 100 shares, ideally to build solid, long-term wealth. Mostly, I have targeted high-yield dividend stocks, trading on low valuations. Typical holdings include Lloyds Banking Group, wealth manager M&G and housebuilder Taylor Wimpey, which I bought over the summer and autumn.
All three were valued at less than 10 times earnings when I bought them, while yielding 5%, 7% and 9%, respectively.
So far, their shares are up between 15% and 20%, despite last week’s dip. Naturally, past performance does not guarantee future results. I’ve already reinvested my first dividends, and there are plenty more in the pipeline if I’m lucky (dividends aren’t guaranteed).
My plan is to hold the stocks – and many others like them – for years, decades and ideally, for life. While I’m working, I’ll reinvest every single dividend, and when I stop working, ideally, I’ll look to draw them as income to top up my pensions.
By investing in a Stocks and Shares ISA, all that income will be free of tax for life. Whereas crypto gains are subject to capital gains tax.
It’s the income I’m after
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I wouldn’t like to rely on Bitcoin to fund my retirement. First, it’s incredibly volatile. Nobody knows what it’s worth from one day to the next. Second, it doesn’t pay any income. My FTSE 100 shares give me an average yield of 7%, with any share price growth on top of that.
FTSE 100 shares can be volatile too, but that could work in my favour. If, say, Taylor Wimpey shares crash, my reinvested dividends will purchase more stock at the lower price. I might also take advantage of the price dip to top up my holdings. Then I’ll sit tight and wait for the likely recovery. Again, there are no guarantees. That’s why I’ll spread my risk by purchasing around 15 shares across different sectors.
I do hold one Bitcoin (and a sprinkling of Ethereum) and have no plans to sell just in case the price does hit $100k (or $250k!!). It could happen. I won’t buy more at today’s price though. Instead, I’m taking advantage of a bumpy January to pick up more FTSE 100 shares at the lower price, and potentially generate yet more dividend income for my retirement.