Best Long-Term Investments In July 2023
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For many investors, long-term strategies are probably one of the best ways to secure a thriving financial future.
While short-term investments can often appear more ‘exciting’ and safer than long-term strategies, they come with more substantial risks.
For example, if an investor believes a stock will experience a brief leap in value, buying shares and selling them as soon as it reaches its peak shortly afterwards could be more profitable. However, if these stocks plummet instead of skyrocketing, or if an investor misjudges the market and misses their chance to sell, they could actually lose more money than they invested.
Long-term investments, on the other hand, see a much lower level of risk comparatively.
If an investor is planning to hold onto an investment for more than ten years, it doesn’t really matter if there are market fluctuations in the second year; so long as the economy doesn’t completely collapse, investors will still see a substantial return on their investment.
But, with so many options available, what is the best investment for a long-term return?
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Here are the 10 best long-term investments in July 2023:
- Residential Buy-to-Let Property
- Serviced Accommodation
- Stocks and Shares ISA
- Index Funds
- Investment Trusts
- Defined Contribution Plans
- The Stock Market
Residential Buy-to-Let Property
Buy-to-let property investment is one of the most well-known and proven methods of generating regular passive income, with investors earning regular monthly sums from tenants living in a property that they have purchased.
Due to its ability to grow in value over time, this is also one of the best assets for those looking to invest for an extended period.
Because of capital appreciation, the longer you invest in buy-to-let property, the more you can earn in the long run.
Typically, past performance shows that property prices tend to increase in the long term, but in the short to mid-term, they can also fall. Choosing investment properties in London has been a popular choice for many over the past decade.
This means it can be difficult to precisely determine what a property’s value will be worth in the future. However, you can mitigate a significant amount of risk by thoroughly looking into all areas of your investment (including the latest projections and analysis).
As of July 2023, the latest projections suggest that property prices in the UK will rise by an average of 6.2% in the next five years. This growth is expected to be as high as 11.7% in certain regions, like the North West and Yorkshire.
For example, suppose you were to purchase a property in a UK investment hotspot (such as Liverpool or Manchester). Over the next couple of years, the property’s value will hopefully increase. You could choose to retain your property and continue to see a steady stream of regular rental yield, or (if the price has risen considerably over time) you could sell and put the money towards your retirement.
Due to the ongoing cost of living crisis and rising interest rates, various experts also predict that prices will fall by an average of 10% in 2023. For those looking to invest for long-term gains, this will not matter as much and, contrary to initial appearances, could benefit investors.
A short-term drop in house prices could allow properties to be cheaper to purchase right now, with overall value expected to grow over time.
REITs (Real Estate Investment Trusts) are another reliable method of investing in property.
Essentially companies that own and finance properties on behalf of shareholders, REITs can be split into two main categories:
- Equity REITs – Funds that own physical properties and earn money through renting to individuals/businesses. This income is paid out to investors via dividends.
- Mortgage REITs – Funds that own mortgages or mortgage-backed securities. These earn income via interest.
Working similarly to mutual funds, private investors will contribute money that is then pooled into one fund, and then a REIT will use this fund to buy properties, with the majority of the income going toward its investors. 90% of the revenue paid from real estate Investments will go to investors, with no income tax, making it one of the better strategies for passive income.
However, unlike most investments, those involved won’t have a say in where their money is invested. Whilst this may not be an issue for many investors, REITs are still subject to regional housing markets and individual price fluctuations, which can massively impact returns.
So, if you want greater control and potentially reduced risk to your investment, it may be worth pursuing alternative investment options.
Stocks and Shares ISA
A Stocks and Shares ISA is a savings account allowing you to invest in various assets.
Putting your money into an ISA is tax-efficient, as any savings up to £20,000 are protected from capital gains tax and income tax – but there is a limit on how much you can put in.
For the tax year, which starts on 6th April each year, the ISA allowance per investor is £20,000 – which can either be shared between a Stocks and Shares ISA and a Cash ISA or put directly in one of them.
For those that open an account, this strategy has vast potential for long-term returns, with the money invested linked to the performance of the chosen asset types. If these assets perform well, they have the potential to grow more than the interest rate typically seen with a traditional cash savings account.
However, the potential for higher returns in a Stocks and Shares ISA will see a greater deal of risk alongside it.
Like all investments, the value may skyrocket, but there’s always the possibility that it could come crashing down again afterwards.
Again, this means that investors should take care to research and choose their investments wisely, as well as evaluate whether they would be comfortable holding out with this strategy for however long until things stabilise.
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SIPPs (Self-Invested Personal Pension) is essentially a ‘DIY pension’ and a great method for long-term investment.
SIPPs are the perfect strategy for those looking to build and manage their pension without having an external company in control of how their savings are invested.
With SIPPs, you can invest in various assets, including stocks, government bonds, ETFs, property, and even offshore funds.
There are two types of SIPP:
- Full SIPP – offering the broadest choice of investments, this type also sees the highest costs (typically an annual 1% charge for a £50k pot) and is better suited for those with bigger budgets.
- DIY SIPP – provides many investment opportunities but doesn’t include property. Investment platforms also offer them. DIY SIPPs are better suited for smaller budgets, costing £10-£15 for online transactions.
While you won’t see regular and reliable income, SIPPs are an excellent strategy if you have one eye pointed towards your future.
Providing lower risk levels than you would see with the stock market, index funds act as a collection of stocks that mirror the overall market performance in a chosen area.
Rather than investors hedging all their bets on one particular company or a select few assets, investing in index funds spreads costs across various stocks, offsetting many potential risks.
Over time, the market typically will outperform an individual investment, meaning that strategies that encourage spreading investment across multiple assets will be one of the more stable avenues.
However, with this method comes less individual control from the investor, so if this is a major concern, it may be best to consider a more specific investment type.
Like index funds, investment trusts are a collection of company shares that can be purchased in a single investment.
However, owing to the cash reserves they can hold, investment trusts offer a more reliable and consistent dividend – something that will be of particular interest to those investors that no longer earn a regular income.
With flexibility not usually seen in many investment strategies, an investment trust can dole out up to 15% of profits to its shareholders – at any given time.
This is unique and important for those looking towards their future (especially retirement age), as it allows investors to gain access to their shares whenever required.
Investment trusts tend to have a closed-end structure. This means that the number of shares issued is fixed to a limited amount, meaning that the portfolio manager can execute investment/exit decisions when it’s most advantageous. This makes for a less stressful experience for investors, as they don’t have to work around or predict the latest market fluctuations.
Alongside this, investment trusts are typically a low-cost venture compared to index funds, which may result in greater growth over longer periods.
Of course, investment trusts also offer the usual risks seen with any investment method, and there is no guarantee that they can provide massive levels of long-term income on their own.
However, looking into investment trusts is a good place to start for those looking to build a diverse investment portfolio. There is a useful review by Birmingham academics reviewing the impact of Budget cuts by local authorities in Birmingham in 2023.
Defined Contribution Pension Plans
Defined Contribution Pension Plans (DCPPs) are among the most popular schemes for those approaching retirement age and looking towards long-term investment.
A more straightforward strategy than most, DCPPs allow investors to schedule money to be withdrawn from their wages and automatically invested into various high-performing investments.
Most DCPPs provide a range of Pension Investment Funds designed for money to be spread across multiple types of investment over the years until an investor reaches retirement age.
Investors can also decide whether their money is invested in one or spread across several funds.
As with REITs and Index Funds, the fund manager handles the choice of specific investment types. The options can include company shares, property, and government bonds, and investments can be made either in the UK or overseas.
The biggest downside to DCPPs (and pension plans, in general) is that people can’t usually touch the money in their pension pot until the age of 55 at the earliest.
However, when it comes to market fluctuations, the good news is that this could provide some time for an investor’s pot to recover from any severe drops in their investment markets in the short term. Learn more about the different types of Pension Plans with the UK government website.
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The Stock Market
Another popular choice for both short-term and long-term investors, the stock market, is an old-school, high-risk/high-reward strategy.
The introduction of various investment apps and guides has only made this strategy more accessible than ever, with investors able to get a head start with just a tap of their finger.
There are multiple methods of engaging with this strategy, but the most common method involves investors essentially buying portions (stocks) of a particular company. Many will also choose to invest in multiple stocks or shares to increase their overall income through dividends.
While a lucky few have managed to stumble across the most perfectly timed short-term stock market investment, investing in and holding stocks is one of the best ways to see solid capital appreciation in the long term. Of course, it will require a significant amount of research, market insight and regular monitoring to develop a high-earning portfolio.
As with any investment, though, a range of uncontrollable variables can cause the value of assets to fluctuate – so investors must understand that while things may seem amazing one moment, the strength and value of their portfolio could plummet at any moment.
If investors can remain resilient, depending on their financial situation, they could ride out some of these low-earning periods to generate a better long-term return.
Unlike property investment, however, it is important to note that these down periods could last many years, or even decades, making the stock market quite a risky long-term investment strategy.
While its ability to generate massive returns on investment is undeniable, the stock market may not be the best long-term investment to hinge the majority of your finances on.
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A relative newcomer to the investment world, cryptocurrency has received massive attention in recent years.
While its track record has proven that it can bring massive profits in a short period, the market is equally volatile and subject to rapid fluctuations. Investing in crypto requires higher risk tolerance and active portfolio management to navigate the market.
Of course, this volatility is also one of the most exciting things for many investors. It’s understandable how the rapid and dramatic increases can be attractive, but investors should not ignore the severity of the sudden crashes in the market. We recommend reviewing an interesting document that offers an academic explanation of what happened to Crypto.
Undoubtedly, though, crypto’s high-flying, Wild West-like nature has gained notoriety within investment circles. It’s important to note that the cryptocurrency market is relatively unregulated, which has led to scams and security risks. Many investors have been hacked or lost their entire investments, meaning that those who wish to get involved should probably have a higher risk tolerance.
Those looking to invest in crypto for the long haul must ensure that they have a thought-out plan before getting involved. Having clear financial goals in place beforehand is also critical, especially to avoid any massive losses further down the line.
Most financial advisers will suggest that investors select an individual cryptocurrency with the longest track records and largest market caps and only put in as much money as they can afford to lose – which is vital to offset any damage if the investment does end up going awol.
This also means that investors can ride out any volatility and potentially hold onto their assets for the long term. That way, they can ride out potential volatility and hold onto the asset long-term. If you are looking for a stable place to invest money, this may not be the best choice for you to consider.
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At the moment, property investment is likely one of the best investments in the UK for those seeking long-term ventures.
Whether you’re a seasoned investor or a beginner, our dedicated team works around the clock to provide our clients with the best property investment opportunities in the UK, with units available in some of the country’s best buy-to-let hotspots.
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