One of the first things you should learn when you begin investing is that it’s all about the long game. Traditionally, investing is more of a long-term solution to build wealth, and that means you’ll have to weather a few storms along the way. With the world still reeling from the coronavirus pandemic, it should not be a surprise that we’re in the midst of some troubling times right now.
This does not constitute advice and advice should be sought in all instances before acting on it.
To become profitable, your investment returns need to be higher than inflation, but since hitting a record high of 4.2% in October, your investments needed to have performed extremely well and that just isn’t the case for many. The good news is that experts expect the inflation spike will be short-lived, but it’s always a good idea to think about your investments in different economic climates.
Here are a few areas to focus on:
Equities
A temporary rise in inflation is likely to affect the stock market in the short-term, but shares usually provide better protection against inflation compared to cash or bonds.
Property
Due to the nature of property, it should offer protection during periods with high inflation. As long as consumer incomes rise, house prices should follow suit. However, interest rate hikes could pose a problem, so be sure to keep a close eye on your portfolio.
Bonds
Because interest is fixed with bonds, higher interest rates have no effect on them, so they tend not to do well with heightened inflation. Consider a multi-asset fund with a mix of equities, bonds, cash, and property.
Cash
Unfortunately, any cash you have sitting in savings will be the worst performing investment asset you have. Inflation directly impacts the real value of your money and any interest rate your savings account might have will not outpace inflation. It’s impossible to predict when or how the rate of inflation will change, but experts believe that any further rise in rates will be slow.
Work with an adviser
With the knowledge and experience of the financial advisers at Dental and Medical Financial Services, you can rest assured your investments are in good hands. We have years of experience in dealing with different types of market conditions, and we can help you make informed and rational decisions about your investments. If you need help focusing on your long-term goals, get in touch with us today.
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