You may not think much about inflation until it becomes a problem. The only people who thrive in a time of inflation are borrowers as it makes their debts less valuable. However, savers, pensioners and investors suffer as it chips away their future interest value and lowers their capital. Once the prices hit the roof, customers suffer the most with businesspeople becoming reluctant to invest. The stock market also suffers a big blow. To lessen the effects of inflation, there are some steps that investors can take, and these include the following.
Invest in Real Assets
Agriculture, gold and property are great protectors against inflation when the prices go up. Find reputable companies that deal with gold and property. Another great way to invest your money is through renewable energy, infrastructure and specialist property. These are a great source of steady income when inflation hits. Agriculture is another great way to shield yourself from inflation. People will always buy food whether there is inflation or not. With the prices going up, you are bound to make some good money from such a project.
Protect Your Savings
Inflation creeps up like a silent thief and diminishes the value of your savings without you even noticing. Even when the inflation is low, your cash savings buying power gets reduced over more than 10 years. If inflation is running at 4.3%, your money will end up halved in only 17 years. At an inflation rate of 3%, your £100,000 saved in the bank will lose a quarter of its value in a decade. Savers should ensure that their money is saved wisely to counter such effects. The first decision should be protecting your savings from the taxman. This is possible through ISAs as they help you maximise the savings without having to pay any taxes on them. Those saving for a new home or retirement and are under the age of 40 can benefit from a Lifetime ISA. It allows them to save up to £4,000 tax-free in stocks and shares or cash. You will also benefit from a government boost of 25% every year. If you want to learn more about ISA and make your investment, Moneyfarm is a great place to start.
Have Some Cash
Ensure that you always have a portion of your savings in cash where you can access it easily. Look for ways to earn most interest on your cash as there are some current accounts that allow you to earn high-interest rates that can easily beat inflation. Unlike an asset that will need to be sold for you to access liquid money, cash simplifies everything.
Look for Equities with a Global Flavour
You can get protected against inflation through equities especially when you invest in shares that pay good dividends. This applies as long as the inflation doesn’t go up to a level that leads to a drastic rise in interest rates. Raising the prices gently is normally exploited by corporations. When companies pass on higher prices and costs to consumers, it results in more profits for them. You should, however, refrain from investing in retail stocks. This is because they may struggle to pass the rise in prices to consumers when inflation is high.