Forget Bitcoin and buy-to-let! This is where I’d invest in 2019

A bull outlined against a field
A bull outlined against a field

Fortunes have been won and lost on Bitcoin over the past couple of years – sometimes by the same people! The price of a Bitcoin rose around 36% during 2015, by 136% in 2016, and then blasted off in 2017 to gain around 1,300% by the time the year was over, even after falling back a bit at the end.

However in 2018, the cryptocurrency continued a long and steady descent that unwound much of the previous year’s gain, falling around 76%. Imagine that, losing about three-quarters of your investment in one year – painful.

Horrendous risk to the downside

Some folks believe the lower price of Bitcoin today represents a bargain and that the price will go back up. I’m cautious about that because there are no underlying fundamentals on which we can judge its true worth. I think the only thing driving the price of Bitcoin is speculation, and that could work to drive the price in either direction during 2019. But consider this. Even now, after the horrendous falls of 2018, Bitcoin is still around 1,000% higher than it was at the start of 2015. To me, the downside risk looks huge. If Bitcoin returns to its January 2015 level, those buying it today will lose more than 90% of their money!

I’d avoid Bitcoin in 2019 but what about buy-to-let? Owning and renting out a property worked out well over the past two or three decades for many people. Rising property prices and increasing rents worked to deliver a decent return, albeit on a longer timescale than the rapid price movements of Bitcoin.

Changing conditions

But things are changing. Compared to the average wage, property prices are far less affordable than they once were and I think that puts a lot of pressure on property prices. Indeed, we’re already seeing some evidence of falling prices and that trend could continue in 2019. Falling property prices would work against your total return from buying and letting a property and, on top of that, the government has been changing the tax regime around buy-to-let to make it less attractive. In other words, if you do make gains on rental income, or rising property prices, you’ll have to give more away in tax than you once might have.

Yet, even though it looks like it will be harder to turn a profit with a buy-to-let property, it’s still a big commitment and a very illiquid investment that’s hard to get out of quickly. It’s also expensive to buy and sell a property, and it’s conceivable that the transaction costs alone could wipe out years’ worth of your buy-to-let gains, if you have any.

A great opportunity

I’ll be avoiding buy-to-let property in 2019. But I think a great opportunity has opened up in that most enduring of asset classes – shares. The stock market correction that started in the autumn has driven down the valuations of many great businesses and dividend yields are looking very attractive. The stock market might have corrected, but many underlying businesses behind the shares are trading well. I think the big opportunity for 2019 is in shares, and you’ve come to the right place to find out all about them here at The Motley Fool.

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Kevin Godbold 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.