Forget the Bitcoin price! Here’s how I’ll use FTSE 100 stocks to try and make a profit

Diverse group of friends cheering sport at bar together

Image source: Getty Images

Bitcoin definitely had a year to forget in 2022. From starting the year around $47k, it lost well over half in value to finish the year below $20k. Even though some FTSE 100 stocks also suffered heavy losses, very few had a comparable performance to the cryptocurrency. So as I look at investment options for 2023, here’s why I’m favouring stocks over crypto.

Yield potential

Bitcoin doesn’t pay me interest for holding it, in the same way I might receive interest from having cash in my bank account. Even though stocks don’t pay interest either, some pay out regular dividends. This means that I can generate a yield from owning a stock.

This might seem like a small difference, but it can really help me, especially this year. I can’t say with certainty how global markets are going to perform. It might be the case that the stocks I buy fall in value. Yet by picking up dividends along the way, I can still potentially make a profit.

For example, let’s say I decide to buy shares in the miner Rio Tinto. It currently has a 10% dividend yield. If the dividend payments stay the same next year, but the share price falls by 5%, I’ll still finish with an overall profit of 5% for the year.

Obviously, there’s no guarantee of future income payments. But it does go to show how I can use selective stocks to generate cash next year.

Proven track record

Bitcoin was created back in 2009, according to various sources. It does have a brief history and likely a bright future. The outlook is one reason I own some Bitcoin!

Yet I do see the value in owning blue-chip stocks that have been around for many decades. These companies have survived whatever economic situation has been thrown their way. That gives me confidence that whatever will happen in 2023, these firms can handle it. Not only that, but investors will be happy to buy the stock in the process.

There are countless examples in the utilities, banking and consumer staples sectors. In fact, there are 19 stocks that have been in the FTSE 100 since inception back in 1984. I feel I can generate a profit from owning these stocks due to replicating the past performance.

Of course, past performance doesn’t guarantee future returns. But it certainly gives me an idea of what to expect.

FTSE 100 stocks in my portfolio

I don’t want to be seen as completely disregarding cryptocurrency. Yet when I’m trying to find a home for the vast majority of my investable cash, I do think it’s wise for me to forget Bitcoin and focus on FTSE 100 stocks instead. This is based on the enhanced yield from dividend payments and lower risk due to the long history of selective businesses.

The post Forget the Bitcoin price! Here’s how I’ll use FTSE 100 stocks to try and make a profit appeared first on The Motley Fool UK.

More reading

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2023

Source link

Leave a Comment