Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing.

Why your investment plan shouldn’t rely solely on property

Stock markets have been particularly volatile in 2020 due to the Covid-19 pandemic. With hopes of a vaccine in 2021, the situation will hopefully stabilise.

Many investors have been turning to property investments, viewing it a potentially safer option as house prices are rising 5.5% a year1. Rental properties are in high demand at the moment due to young people being unable to afford a deposit on their own home. Currently, many lenders are only offering 85% LTV mortgages meaning that buyers need a 15% deposit.

If property demand and prices fall it may be harder to recover losses from property as opposed to investments. Property, like any investment, is complex and it is worth considering all of your options. For a successful investment portfolio, you need to make sure your investments are diverse. Only investing in property will increase the amount of risk. Property is also a hands on investment option as you need to make sure that the property is well maintained which can be costly. You also need to factor in periods of time when the property is vacant.

How do I diversify my portfolio?

There are many investment choices, including shares, investment trusts, funds, bonds, property; it can be overwhelming and hard to navigate. A financial adviser can be invaluable in explaining the differences between investment options to you. They will also know the tax implications of each type of investment and be able to recommend which is most suitable for your individual circumstances. Tax regulation changes have reduced the profitability of buy-to-let properties as more of the return is now subject to income tax.

Buy-to-let properties may be a suitable investment for some people, but expertise is required to optimise the investment. You need to make a lot of decisions, for example if you are going to manage the property yourself or use an agent. You need to decide if you are going to purchase multiple properties in different locations or want all of your properties in a similar area.

At Four Wealth Management, a financial adviser can provide advice on how to build a balanced investment portfolio to help you achieve your personal goals.

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The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.

1 Rightmove house price index, October 2020


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Why your investment plan shouldn’t rely solely on property
FourWealth Management