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Apparently the recent launch of the Shibarium layer 2 blockchain network built by the Shiba Inu community didn’t go smoothly. This caused the meme coin price to drop sharply, further adding to my skepticism of crypto. Here’s why I’d rather invest in high-quality UK companies for high-yield passive income.
No little Bitcoins
My main problem with crypto is that any investment I make will never pay me back any income. That is, I’m not going to receive any dogecoin dividends I can use to go buy bread and milk in my local Tesco.
That’s because crypto doesn’t produce anything tangible, as investing legend Warren Buffett has repeatedly pointed out.
Bitcoin has no unique value at all, it doesn’t produce anything. You can stare at it all day and no little bitcoins come out…It’s a delusion basically.
What isn’t a delusion is that many FTSE 100 stocks are offering sky-high dividend yields right now.
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I can invest in these companies today and expect to share in their profits. What’s more, I also get a semi-regular update from management so I can check everything is ticking along nicely (or not).
The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Get rich slowly
To my mind, the main appeal of crypto is the allure of getting rich quickly. The only other thing in life that I think matches it is the idea of a winning lottery ticket. And the chances of getting rich from either look about the same to me.
What isn’t in doubt, however, is that many people have gotten rich slowly through investing in the stock market. If I put £400 a week into shares that return an average of 10% per year, I’d have £1.1m after 19 years.
That’s assuming I leave it untouched and reinvest the dividends. Such is the power of compound interest.
Indeed, it’s so powerful that if I invested this way for 50 years, generating my average 10% return, I’d end up with over £25m. After 89 years of £400 a week, the portfolio would top £1bn.
But would I have a million-pound portfolio after 19 years of putting my hard-earned savings into crypto? I have no idea, so I’d rather try the stock market route, thank you very much.
A few final caveats
Now, as exciting as that may sound, I should point a couple of things out. The first is that a 10% annual long-term return isn’t guaranteed.
True, it is broadly the average annualised return of the S&P 500 (with dividends reinvested) over the last few decades. But that historical average may trend downwards.
Secondly, dividends aren’t guaranteed to be paid throughout the year. Events like banks collapsing and pandemics do happen, disrupting the cash flows out of which companies pay dividends.
Today, however, many of the FTSE 100 companies paying high-yield dividends are not in distress. It’s just that investor sentiment is low around Footsie stocks and the UK economy right now.
But history suggests that it can pay to invest when others are cautious and fearful. In fact, it’s times like these when I prefer to do my shopping.