UK Markets close in 6 hrs 50 mins

In this rising stock market, here’s how I’m targeting shares over buy-to-let

Businesswoman calculating finances in an office
Businesswoman calculating finances in an office

According to The Telegraph, figures show that property landlords have been abandoning the buy-to-let market. And I would as well in order to target a gathering opportunity in the stock market.

A dearth of incentives

Property research and market analysis company TwentyCi said legislative and tax changes have dulled incentives for landlords. Meanwhile, the reduction in buy-to-let mortgage products “will inhibit any significant injection of new supply.” 

But despite such constraints on the supply of new rental property, TwentCi reckons people have been deferring decisions to buy their own homes. And that’s because of “adverse economic conditions”.

At first glance, I reckon the situation looks like an opportunity in the buy-to-let property market. What could be better than having supply constraints and elevated demand for rental property? As one shrewd landlord once whispered in my ear years ago, “there’s only one way rents are going, and that’s up!”

Attractive stock market yields

But new figures suggest landlords aren’t rushing to take advantage of favorable supply/demand characteristics in the property market. Instead, the opposite is happening. And rental stock is transferring to private homeowners at an alarming rate.

I’m shunning buy-to-let property investment for my own portfolio. And why wouldn’t I when similar yields are available in the stock market?

Indeed, rather than dabbling with the property market, I can get returns from stocks and shares from the comfort of my desk. And all it takes is for me to hone my investment skills. Then I need to carry out some research and due diligence. And finally, I have to operate the mouse controlling my computer to buy some shares. That said, my capital will then be at risk and positive investment outcomes are never certain.

A developing opportunity

The stock and property markets tend to work in similar ways.  Stocks and shares in general have so far always cycled up and down while following a long-term trend higher — just like property.

Right now, I reckon there’s a chance the property market may cycle down. And the stock market seems as if it’s beginning to cycle up after a period of moving lower. So, that looks like a developing opportunity in the stock market for me as an investor with a long-term focus.

And I’m pursuing my stock market strategy with several tactics. First, I’m targeting fallen cyclical enterprises whose share prices have been on the floor. The strongest ones have been the first to begin bouncing back. And I’ve been buying some of them, such as GreggsDunelm and others.

I learnt the technique of buying the first to bounce from American stock trader Mark Minervini. He reckons the strongest businesses will often be the first to see their stocks turn up again and they may go on to be the leaders in the next market rally.

Secondly, I’m looking for beaten-down small-cap stocks that could go on to become the growth leaders of tomorrow. And thirdly, I’ve kept up my regular monthly investments into funds and trackers.

There’s no guarantee of long-term success for me. And not all my picks will be winners. Indeed, all shares carry risks as well as positive potential. But so far, things have been encouraging.

The post In this rising stock market, here’s how I’m targeting shares over buy-to-let appeared first on The Motley Fool UK.

More reading

Kevin Godbold has positions in Dunelm Group and Greggs. 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 2022