Forget buy-to-let! I’d buy cheap FTSE 100 shares today to make a million
The Motley Fool
Published May 31, 2020 11:24
Updated May 31, 2020 11:40
Forget buy-to-let! I’d buy cheap FTSE 100 shares today to make a million
After the recent stock market crash, investors may consider assets such as buy-to-let property to provide a steady return. However, while the outlook for the FTSE 100 is uncertain in the short term, over the long run the UK’s leading blue-chip index may produce significantly higher returns and increase your chances of making a million.
FTSE 100 bargains Buy-to-let property, as an asset class, has come under attack in recent years. The government has completely reorganised the tax regime for buy-to-let investors, removing many tax breaks and benefits investors previously enjoyed.
Rental properties now also have to conform to tighter regulations. These have increased the cost of doing business for the average landlord. Meanwhile, rising property prices have hurt returns.
Investing in the FTSE 100 has many advantages to owning rental property. Blue-chip stocks are even more attractive after the recent stock market crash.
The stock market has experienced many booms and busts over the past few decades. On every occasion, the FTSE 100 has recovered from its trough to go on to make a new peak. And while the outlook for the global economy is uncertain in the short term, it’s likely the FTSE 100 will return to this pattern in the long run.
To put it another way, after the recent market crash, the FTSE 100 may well go on to make a new all-time high.
Diversification As such, now could be a great time to buy discount FTSE 100 shares. It’s unlikely you’ll time your purchase perfectly. Indeed, the coronavirus crisis is far from over, and there could be further economic pain ahead. However, in the past, buying a selection of stocks when they’re relatively cheap has always paid off as investor confidence has returned. It might take some time, but the same should happen this time around.
That said, some companies may not survive. So, I’d focus on buying FTSE 100 companies with strong balance sheets and loyal customers as well as defensive products. This will put them in a strong position to benefit from the economic recovery over the next few years. It should also help them weather the coronavirus storm if it lasts for many months.
It’s difficult to tell what sort of returns investors can look forward to over the next few years. But we do know that over the past century, UK equities have returned around 7% per annum on average. At this rate of return, I calculate it would take just 29 years to turn an initial investment of £100,000 into £1m with additional contributions of £250 a month.
These are just average figures, and you may be able to generate significantly higher returns buying individual FTSE 100 equities at depressed prices. And, unlike buy-to-let property, investors can also achieve significant tax benefits owning stocks and shares inside an ISA or SIPP.
Get The App
The post Forget buy-to-let! I’d buy cheap FTSE 100 shares today to make a million appeared first on The Motley Fool UK.
Rupert Hargreaves 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
First published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.