As a readerof this website you probably have a tidy sum of moneyyou want to invest. It may be cashyouve 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 wont 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 hes also bought another house that he has a mortgage on andis 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 paya mortgage. I have the savings that Ive accumulated through my life. And I know, some way down the line, Ill 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. Theres 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.
Bycontrast, 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. Whats more, if you have shares that arentin 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. Additionallymore through luck than good judgement, I think Ive got my timing just right.
Because the past 17 years have been terrible for equity investors, as weve endured a bear market in shares thats just drawing to a close. But Im convinced were at the beginning of a global bull market that will run to 2035, when I will be 65 and on the brink of retiring.
Thats why I think now is the ideal time to invest. And mylargest chosen investments areChina and India, as Ibuyinto the hugestock market boomthat I expectthese resurgent countries to experience.
So then, should you invest in buy-to-let or equities? Well,I thinkyou can make a success of both. It depends on what youre knowledgeable about and what youre comfortable with.
But myconsidered opinionis that, if you choose your investments carefully and wisely, over the next 20years nothing can beat shares.