Right now, I’m looking to build my long-term wealth by investing in bargain FTSE 100 stocks. I think there are some amazing opportunities out there following the stock market crash. As the nation emerges from lockdown, the recovery may soon be underway. Let’s just hope we can avoid a second wave of the coronavirus.
Others view things differently. Many are taking advantage of the shaky housing market, to invest in buy-to-let properties instead.
Here’s why I buy FTSE 100 shares
I was a big fan of buy-to-let until the Treasury launched its tax attack. It slashed wear-and-tear allowances, slapped on an extra 3% stamp duty on purchases, and phased out higher rate tax relief on mortgage interest.
The assault was brutal. Ever since, I have chosen to invest in FTSE 100 stocks, tax-free inside my Stocks and Shares ISA.
Buying shares is so much easier than hunting down a property, doing it up, then finding and replacing tenants. You can buy and sell shares in seconds, with a couple of clicks.
Buying FTSE 100 shares is also a lot cheaper. You can trade from around £10, or less. With property, you can pay tens of thousands in stamp duty (with that 3% BTL surplus), legal fees, conveyancing and valuation costs. Then you have to make your purchase fit for tenants to live in, and meet ever more stringent regulations.
After all that, any profits are subject to income tax and capital gains tax. Invest in a Stocks and Shares ISA, and you pay no tax at all, for life. Choosing FTSE 100 stocks over a buy-to-let is a no-brainer to me.
Despite that, many are still up for it. Figures from buy-to-let lender Mortgages for Business show 30% of its investors are remortgaging with a view to expanding their portfolio. Many are looking to build a war chest, to snap up cheap properties in the event of a house price crash.
Good luck to them, but that isn’t what I would do. Even if house prices fall I suspect the drop will be less than people think, as demand for homes is high. Existing owners are reluctant to sell at a loss, unless they have no choice. Property is expensive.
I wouldn’t fancy being a landlord during the current crisis, having to chase good, loyal tenants who are struggling to pay the rent as the country falls into recession.
You don’t have to worry about that when you invest in FTSE 100 stocks. You simply buy them, and hold them. Reinvest your dividends for growth, and watch them grow in value.
You could even make a million from the FTSE 100, although don’t expect to do this overnight. Investing is for the long term. If you take the opportunity to buy FTSE 100 shares whenever they are cheap, as they are now, your wealth will steadily build over time. You could do it with just £500 a month. If you give it plenty of time.
Now’s the time to start looking for top FTSE 100 stocks. There are bargains out there.
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
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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.