With the rate of COVID-19 spreading exponentially across the world, it is difficult to prioritise anything but health currently. However, many of us will be fearful of our investments with the economy worldwide taking a significant hit.
Whilst almost all markets become increasingly volatile, many peoples stock portfolios will be overwhelmingly in the red. The temptation is there to take the hit and flee whilst you can, but is this the right thing to do, or a simple kneejerk?
It is anyone’s guess as to when this volatility will come to an end, some predict months, others predict years. Whilst almost all stocks and markets are currently experiencing a fall, experiencing investors are endeavouring to remain calm and not make any drastic decisions.
Market crashes are nothing new, investors with long-term shares through countless other crashes experience an average annual return of roughly 8% by the close of the investment. Having a diverse, well balanced portfolio will still likely provide you with healthy returns, we just must battle through this dip.
With that said, there are some exceptions where it is the right time to either exit the market, enter the marker or steer clear all together. A prime example of this is buy-to-let.
How is the buy-to-let market fairing?
Whilst shares have fallen at a high rate, the appeal of bricks and mortar equally becomes more appealing. Something tangible that everyone needs, the appeal has certainly improved over the past fortnight or so.
With a huge housing shortage facing the UK and an ever-growing number of people preferring to rent over purchasing, the demand is clearly there. Although on paper the market should be primed, there are is a case for caution.
Whilst the supply and demand is certainly weighted to landlords, the constant changes introduced into the housing market, specifically buy-to-let, has continued to make the market less appealing to investors. Although we have seen a rise in existing landlords increasing their portfolios, landlords are exiting the market, selling up property as opposed to renting it out.
Only a few years ago did we see buy-to-let as one of the most attractive options for investors. Often a ‘scapegoat’ when the Government need to increase taxes, landlords are often the ones that take the hit. With a 2% Stamp Duty Land Tax (SDLT) introduced to overseas investors, there is even more reason to look further for investment opportunities.
The Government vouched to create 300,000 new homes each year until 2025 to match the needs of those living in the country seeking suitable housing. With the Government falling short of this figure already, we are likely to see the Government increase measures to deter investors, freeing up additional housing.
A case for calm
The consensus here is to not do anything rash. If you currently hold a buy-to-let investment, you may want to consider selling up whilst the property market is still in relatively good health. Otherwise, with investments in stocks or alternative investments, such as loan notes, you are best off riding this storm.
You only realise a loss on investment when sold at a price lower than you bought it for. Whilst the stock price is low and it may go even lower, the general advice from experts is to hold the stocks. Companies that are in good health or have contingencies to weather this storm are likely to experience the greatest growth when the storm has settled.
There is a case to even source out shares in companies and purchasing now at a reduced rate. Whilst we might see a continued downward trajectory, the opportunity for some bargains is ever present. Some historically secure and healthy shares are currently being sold off at discounted rates, creating buying opportunities for savvy investors. Exercise caution here, there are shares out there for the benefit of long-term investors, as always, do research before committing.
