The stock market crash may have caused some ISA investors to reassess their retirement plans. For example, they may naturally become more cautious and decide to prioritise cash holdings over investments in UK shares.
However, now could be the right time to buy high-quality stocks and hold them for the long run. Doing so could enable you to capitalise on low valuations currently available, and produce higher returns over the coming years than other assets. It could even improve your prospects of retiring early.
ISA investing after a stock market crash
ISA investors may become more risk averse after the market crash. After all, many UK shares are currently trading at their lowest levels since the last bear market in 2009. Furthermore, there’s scope for them to trade even lower as risks facing the world economy are at heightened levels.
However, the return prospects for FTSE 100 and FTSE 250 shares could be more promising today than they have been for many years. Both indexes currently trade significantly lower than they did at the start of the year despite their recent rebounds. Therefore, they provide investors with the opportunity to implement a buy low/sell high strategy that could offer market-beating returns in the long run.
Relative performance of other assets
Due to the likelihood of a recovery after the recent market crash, the returns on UK shares could be more attractive than those of other mainstream assets. Cash ISAs, for example, may struggle to offer returns that beat inflation due to low interest rates. The same applies for bonds, which may previously have been seen as a realistic alternative to shares. And, with buy-to-let properties being valued at close to record multiples of average salaries in the UK, the prospects for landlords could be challenging.
As such, any investor who’s seeking to gradually build a nest egg for retirement over the long run may be better off buying shares. Not only do they appear to offer good value for money at the present time, the return prospects for other assets are somewhat unappealing on a relative basis.
Identifying the best UK shares
Of course, risks surrounding a second market crash could remain in place over the coming months. Therefore, it may be prudent to purchase the best UK shares that are available. They may include businesses with solid balance sheets, low fixed costs in case of a second lockdown. They may also have strategies that allow them to be relatively flexible to respond to potential changes in consumer trends.
By focusing your capital on such businesses, you could build a sound portfolio that helps to improve your financial prospects. It could even help you to bring your retirement date a step closer as the economy’s outlook improves.