Investors may be wary of using this year’s Stocks and Shares ISA allowance in the middle of the stock market crash. As the FTSE 100 falls sharply, some may be tempted by rival investments, such as gold, Bitcoin, buy-to-let, and the Cash ISA.
This year’s deadline of midnight on Sunday 5 April is looming fast, but you still have time to make an online application for a Stocks and Shares ISA. That’s what I’d do right now. I believe the FTSE 100’s long-term prospects are stronger than they seem.
Gold is seen as a store of value, and should be soaring in these uncertain times. Yet it’s fallen almost 4% in the last month. Fund managers have been taking profits and using the money to buy cut-price shares. They know a buying opportunity when they see one. If we get a grip on Covid-19 and investor sentiment recovers, the gold price could fall even further.
Bitcoin, gold, buy-to-let and Cash ISA rated
Before the crisis, many claimed crypto-currency Bitcoin was a store of value. They were wrong. The Bitcoin price almost halved to around $5,000 at one point. It has picked up slightly, but cryptos will not keep you safe in this stock market crash.
As for buy-to-let, the Treasury’s tax crackdown has killed that off. Investors now pay a 3% stamp duty surcharge, ‘wear and tear’ allowances have been cut and, from Monday, investors will only be able to claim mortgage tax relief at 20%. Buy-to-let is a lot of effort, for little reward.
So what about the Cash ISA? It will protect your capital, but that’s it. Today’s rock-bottom interest rates mean your money will be eroded by inflation. Leave too much money in cash and you will miss out on the FTSE 100’s far greater growth prospects.
Stocks and Shares ISA wins
I don’t expect an instant end to the FTSE 100’s current challenges, as coronavirus deaths look set to grow in Europe and the US. The multi-trillion-dollar government and central bank stimulus plan packages should prevent outright share price collapse though. They should also provide fuel for the recovery, once we get the infection rate down.
As soon as investors see signs of progress on that front, they’ll start buying shares again, and the stock market crash will reverse.
History shows the FTSE 100 always bounces back from a crisis, as it did after Black Monday in 1987, as well as the technology crash, and the financial crisis. The index fell by half, but investors who steeled their nerves and bought shares for the long term have generated strong returns.
So don’t snub this year’s Stocks and Shares ISA despite the stock market crash. Act now to beat the deadline. Hurry up, the clock’s ticking…
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Harvey Jones 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.