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Buy-to-let or stocks? This is where I’d put my money as markets crash

Royston Wild
A house being constructed in the countryside

Look, I get it. Financial markets remain extremely volatile, and many individuals’ stocks portfolios have been painted an unenviable shade of red. It can be mighty tempting to cut and run before things get any worse.

My own shares portfolio has taken an almighty beating over the past fortnight as well. Every one of my stocks, regardless of its price, size or risk profile, has dropped during the period. It’s anyone’s guess as to when the washout will end, with Covid-19 infection rates continuing to spread globally.

I’m disappointed, sure. But I’m certainly not ripping my hair out. Those with a well-balanced investment portfolio packed with quality stocks should still make good-to-great returns in the years ahead. Market crashes are nothing new, don’t forget. And it’s been proven that, even including periods of extreme weakness like this, the average long-term shares investor can expect to make an annual return of up to 10%.

What about buy-to-let?

In the face of sliding share markets, the appeal of ‘bricks and mortar’ has improved for many individuals over the past fortnight. This also makes sense, certainly here in the UK where a huge homes shortage is supportive of property prices.

Those deciding to wash their hands of share markets and choosing to take the plunge with rental property investments could be making a huge mistake though. Yes, that aforementioned supply/demand imbalance means that, like share prices, long-term investors should probably realise a large profit on their physical investment.

However, the growing costs of buy-to-let ownership, whether that be through rising tax liabilities, increased running expenses or rising fees, has smashed the profits that landlords can expect to bank by renting out their properties.

It’s likely that we’ve just seen the beginning of the government raid on landlords’ pockets. The goal to create 300,000 new homes per year is already looking pretty stretched, so efforts to force more buy-to-let owners out of the market could well be stepped up.

Keep calm

I’m certainly not prepared to do anything silly like sell my stocks and invest in buy-to-let. Remember that you can only realise a loss on your investments once they’re sold at a lower price than what you bought them for. If you hang on to them it’s likely you’ll still make a handsome return when the market recovers. So be patient and don’t hit the panic button.

Indeed, at the current time I reckon it’s worth scouting share markets for bargains. Clearly you need to be prepared for more weakness in the days and weeks ahead. But there are plenty of shares that provide ample upside for long-term investors at current prices.

The scale of market anxiety means that some brilliant, rock-solid shares are being sold-off alongside more brittle equities. This has created the sort of buying opportunities that only come about once in a blue moon. So stay calm, do your research and get ready to strike!

The post Buy-to-let or stocks? This is where I’d put my money as markets crash appeared first on The Motley Fool UK.

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Royston Wild 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 2020