The Motley Fool

Forget buy-to-let. I’d buy cheap FTSE 100 shares in this market crash to retire early

Image source: Getty Images.

The FTSE 100’s recent market crash has left many investors with significant losses on their existing holdings. This may naturally dissuade them from buying further stocks, since they may wish to recover their losses before investing further in large-cap shares. They may even decide that less volatile assets, such as buy-to-let property, are more attractive.

However, the FTSE 100’s low valuations, its recovery potential and the chance to diversify across the world’s fastest-growing economies mean that it may offer a superior risk/reward opportunity than buy-to-let. As such, buying shares in this market crash could help you to retire early.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Diversification

One of the challenges facing buy-to-let investors is that diversification requires an exceptionally large amount of capital. Buying a handful of properties to reduce risks (such as rent not being paid, void periods and repairs being required) is likely to cost a significant amount of money – even if you borrow a large proportion of the purchase price.

By contrast, diversifying among FTSE 100 shares is a relatively low-cost and simple exercise. The index generates around two-thirds of its revenue from economies outside of the UK. It also contains a wide range of companies that operate in varied sectors. Therefore, investors can build a portfolio of businesses that, together, offer a high degree of diversity. This reduces overall risk, and may improve your long-term returns.

Valuations

As well as offering a greater amount of diversification, the FTSE 100 appears to be more attractively priced than buy-to-let property after the market crash. Many FTSE 100 companies are now trading on valuations that are well below their historic averages. In some cases they face very challenging futures. But many large-cap shares have the financial strength to overcome their short-term risks and produce improving profitability in the coming years.

Buy-to-let property may not have experienced a visible decline in its value in recent weeks, as per the FTSE 100. But it seems unlikely that the coronavirus lockdown will have left prices at a similar level to where they were a few months ago. Fears surrounding job security and an uncertain economic outlook may mean that, as well as being relatively unaffordable, property prices experience limited growth in the coming years.

FTSE 100 recovery prospects

Both buy-to-let property and FTSE 100 shares have solid track records of recovering from their past downturns. Therefore, they are likely to deliver high returns in the long run that could produce strong capital growth for investors.

However, low valuations across the FTSE 100 mean that it could produce higher returns than buy-to-let property. It also appears to offer less risk due to its diversification prospects. Therefore, buying FTSE 100 shares today could be a sound means of boosting your financial outlook. It could even help you to retire earlier than you had previously expected.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Peter Stephens 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.