Central banks are expected to keep cutting benchmark rates in order to jump-start their economies, placing downward pressure on interest rates and bond yields in the months ahead. Low interest rates can erode the value of your savings over time, so keeping your money in the bank is not ideal.
Investing in capital markets, on the other hand, has become even more difficult. On the one hand, top-rated government and corporate bond yields have dropped to near-record lows, making them less successful as an inflation hedge. Equity markets, on the other hand, have become riskier as a result of increasingly high valuations and a weakening global economy.
You may want to consider a broader range of assets for income and capital growth to achieve a fair return without taking on too much risk.
What does inflation mean to you personally?
It is important that you be aware of the inflation rate when you are considering investments and savings, because it makes a major difference to whether you make a gain from real terms (after inflation).
A year later you will have 2 percent more cash.
If That’s the Case, although you have got more cash, it can buy significantly less than the amount that you started with
If your purpose is to generate income in your investment, then you want to discover an account investment which’surpasses inflation’ — i.e. the curiosity or gain you make is greater than the inflation rate.
In the event you attempt to conquer inflation?
Based upon your situation, you may or may not need something that beats inflation.
This is because normally, to get higher yields, you may have to take additional risk.
When it’s extremely important to you that you keep your money secure, you may want to go to get an account with lesser interest, and increase your savings by simply adding money each month.
To understand what is suitable for you, it will help to consider your savings goals.
As a general principle:
For short-term targets where you intend to invest the money in five years it is safer to go to get a savings account, not worry too much about inflation.
For long-term goals you have to keep inflation in mind while you invest.
Placing your savings goals
Savings goals are the situations you want to attain in future, whether it’s purchasing a new car, saving for retirement or sailing round the world.
As soon as you’ve set your goals, you can work out how to achieve them — some will be suited to long-term investments, some to short-term savings.
The Way to beat inflation
Purchase Gold and commodities:
During this period of time, gold actually protected you from high-teens inflation and made you much richer. But it neglected to keep up with inflation then and for a long period of time.
Tough assets like property keep their value in an inflationary environment. If you have your home or a buy-to-let then you have a great hedge.
Invest in Stocks and Shares:
When you buy a stock in a business that you own a bit of a real small business. In a controlled inflationary environment, stocks that could improve their prices provide good inflation protection. Some companies also own hard assets such as factories and buildings.
This also can help beat inflation. Not all stocks are made equal and not many businesses work nicely under high inflation. Food stocks, consumer staples, healthcare and some technology stocks are some good options as they can boost their prices as inflation climbs up higher.
How do you beat inflation? do you have a more bullet proof way? share it with our readers.