As a reader of this website you probably have a tidy sum of money you want to invest. It may be cash you’ve saved over the years, or money from an inheritance. The question is, how can you make the most of this money?
Bank or building society savings accounts yielding 0.5% interest a year certainly won’t cut it. Which leaves you with buy-to-let or shares. But right now, what is the better option?
Buy-to-let can work for you
A friend of mine has gone all-in for buy-to-let. He has a house where he lets out a room, and he’s also bought another house that he has a mortgage on and is letting out. Even though he and his wife only work part-time, they earn enough to support their family and live a reasonably comfortable life.
So does buy-to-let work? For him, it certainly does.
My plans are different. I have my own house, where my family live and on which I pay a mortgage. I have the savings that I’ve accumulated through my life. And I know, some way down the line, I’ll receive an inheritance. And I have chosen to invest this in shares for the long-term.
Why not buy-to-let? Well, the tax on buy-to-let has increased substantially. There’s a new stamp duty land surcharge that has just come into force that will add to the amount investors will pay when they buy a house. And next year rules that will allow landlords to offset all their mortgage interest against their tax bill will be phased out.
By contrast, taxes on investing in shares are falling. From April 2017, the annual amount you can invest in an ISA will rise from £15,240 to £20,000. What’s more, if you have shares that aren’t in an ISA, the amount of capital gains tax you pay on the profits you make has been cut to 10% for basic rate tax payers and 20% for higher rate tax payers.
But right now nothing can beat shares
Suddenly stocks and shares are more attractive, and buy-to-let is less appealing. Additionally more through luck than good judgement, I think I’ve got my timing just right.
Because the past 17 years have been terrible for equity investors, as we’ve endured a bear market in shares that’s just drawing to a close. But I’m convinced we’re at the beginning of a global bull market that will run to 2035, when I will be 65 and on the brink of retiring.
That’s why I think now is the ideal time to invest. And my largest chosen investments are China and India, as I buy into the huge stock market boom that I expect these resurgent countries to experience.
So then, should you invest in buy-to-let or equities? Well, I think you can make a success of both. It depends on what you’re knowledgeable about and what you’re comfortable with.
But my considered opinion is that, if you choose your investments carefully and wisely, over the next 20 years nothing can beat shares.