Forget gold and Bitcoin. I'd buy cheap stocks today and hold them for 10 years

Cheap stocks could deliver significantly higher returns than gold and Bitcoin over the next decade in my opinion.

cartoon of a miner digging a bitcoin out of rock

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Buying cheap stocks after a market crash is a challenging process for many investors. After all, stock prices can remain volatile for a sustained period of time after a market downturn. They may produce paper losses that can cause worry among investors.

However, the long-term track record of the stock market suggests that buying undervalued shares today and holding them for a decade is likely to produce high returns.

As such, avoiding popular assets such as gold and Bitcoin to purchase cheap stocks could be a shrewd move even while the stock market continues to be volatile.

Relative appeal

Buying cheap stocks may not produce higher returns than gold and Bitcoin in the short run. Gold, for example, may experience further capital growth due in part to its status as a store of wealth. Investor demand for the precious metal may increase if the global economic outlook weakens, and investors adopt an increasingly risk-averse stance regarding the assets they hold.

However, over the long run the return prospects for gold could be relatively disappointing. Investor sentiment is likely to improve, which could make riskier assets such as equities more attractive. And, with gold trading close to an all-time high after its gain since the start of 2020, it may lack capital return potential over the next decade.

Likewise, Bitcoin may be seen by some investors as a means of differentiating a portfolio. However, its long-term prospects are exceptionally difficult to predict due to its lack of fundamentals and dependence on investor sentiment to determine its price. With a limited size and potential regulatory challenges ahead, Bitcoin's risk/reward ratio may prove to be somewhat unattractive relative to undervalued stocks.

Buying cheap stocks

Purchasing cheap stocks and holding them for a long time period, such as ten years, has been a worthwhile means of generating high returns in the past. Bargain shares do not necessarily reflect the quality of a company, since investor sentiment can be weak for a variety of reasons.

For example, at the present time some stocks may be viewed by investors as unattractive simply because of the uncertain future facing the world economy. They may have solid balance sheets, sound strategies and wide economic moats that provide a high chance of surviving the global economic crisis, as well as generating improving profitability in the long run. However, because of weak investor sentiment towards the wider stock market, they offer low valuations.

Through buying high-quality companies while their stock prices are low, it is possible to capitalise on the stock market's recovery prospects. The stock market has always experienced a market rally after its downturns in the past, and is likely to experience a similar outcome following the current challenges facing the world economy.

Fiscal and monetary policy stimulus mean that stock prices could experience a sustained bull market, which means that now could be the right time to buy a diverse range of cheap stocks and hold them for the next decade.

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Cheap Shares

Couple at an airport waiting for their flight.
Cheap Shares

Is Qantas a bargain ASX 200 stock today?

Analysts at Goldman Sachs think the Flying Kangaroo could be dirt cheap.

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Cheap Shares

1 secretly cheap ASX 200 stock I'm buying for the long run

The best performer on the index last year has had a poor start to 2024. Let's examine whether this is…

Read more »

A young woman sits on her bed holding a cup of coffee inside her recreational vehicle hired through the Camplify website
Cheap Shares

3 struggling ASX shares to buy at a discount

These stocks are down temporarily because of temporary issues. This could be a golden opportunity to buy cheap.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

2 'materially undervalued' ASX 200 shares to buy while they're at 'attractive value'

Is there a better feeling in investing than grabbing stocks for cheap then watching while everyone else catches on to…

Read more »

Five happy young friends on the coast, dabbing and raising their arms in the air.
Cheap Shares

5 oversold ASX shares to buy in March 2024

Will you get 'em while they're cheap?

Read more »

Rocket takes off from the hand of a businessman.
Cheap Shares

11% yield? 2 strikingly cheap ASX shares 'primed for recovery'

Discounted stocks are sometimes a value trap, but experts reckon this pair is ready to soar again.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Cheap Shares

1 top ASX bargain stock that's ready for a bull run!

The market savaged these shares during reporting season, but multiple experts are bullish for the years to come.

Read more »

Three young women on holidays smile at they look at a map.
Cheap Shares

Long-term investing: 3 top ASX stocks you can buy for under $20 a share

These shares don't cost the earth to add to the portfolio, but all represent businesses going places.

Read more »