The FTSE 100 is having a good year, relative to almost every other investment. It is down just 5.45%, which is a modest fall compared to many asset classes. Especially those at the riskier end of the spectrum, like Bitcoin.
The cryptocurrency has fallen an incredible 56.45% in 2022 to $20,787, and is down 45.43% over 12 months.
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Bitcoin is a very different beast to the UK’s index of blue-chip stocks. It is a virtual currency with as yet unproven real world uses, and is intensely volatile.
By contrast, the FTSE 100 is packed with stocks of real-world companies delivering real-world profits and dividends. Both may have a role to play in a diversified portfolio, but I’d only buy Bitcoin with money I was prepared to lose. Right now, I don’t want to lose much at all.
I’d buy FTSE shares today
As inflation rockets and interest rates follow, investors are viewing the FTSE 100 with fresh eyes.
Instead of chasing high-risk, high-reward assets, such as Bitcoin and US tech stocks like Tesla, they are now seeking solidity.
The FTSE 100 offers plenty of that. It is packed with established banks, insurers, housebuilders, pharmaceutical firms, utilities, and energy and commodity giants.
These companies have millions of loyal customers and are generating steady revenues today. Some have benefited from recent turbulence, with BP and Shell doing well out of the rising oil price.
Commodity companies like Anglo American and Rio Tinto are also benefiting from rocketing raw materials prices.
Rising interest rates may also help banks like Barclays and Lloyds Banking Group. They can now widen their net interest margins, the difference between what they charge borrowers and pay savers. This should help offset the inevitable increase in loan impairments.
Healthcare firms like AstraZeneca and GlaxoSmithKline offer me recession proofing, as people are more likely to fall ill in hard times.
All of these companies pay generous dividends, which protect my savings against the ravages of inflation. While Bitcoin may one day transform the world, the risks are high and the rewards are distant. Cryptocurrencies do not pay any income, yet FTSE 100 dividend shares give me cash rewards today, in the shape of regular shareholder payouts.
Of course, those dividends are not guaranteed. If a company’s profits fall, then its dividend can come under pressure. Dozens of firms on the FTSE 100 scrapped or suspended their payouts during the pandemic. Most quickly restored them.
Bitcoin is too volatile for me now
So far this year, FTSE 100 company earnings have been relatively resilient. That could change, especially if we do slump into stagflation and recession.
Companies listed on the FTSE 100 generate three-quarters of their revenues overseas, spreading risk. Plus that money is worth more when transferred back into sterling, which is weak right now.
Some may see the Bitcoin slump as a buying opportunity. Personally I feel it is the wrong asset class at the wrong time. I think the real opportunity lies in FTSE 100 shares.