Inflation is rising and it can eat a hole in the value of your investments. Essentially, it means you can’t get the same bang for your buck as you once did. But all is definitely not lost.
So, what steps can you take to protect the value of your portfolio against the enemy of high inflation?
1. Choose growth investments: traditionally that’s property and shares. But remember, you have to be in for the long-term to get through any short-term price fluctuations and the current real estate downturn. Even so, if you want to beat inflation, high-growth assets such as shares and property is the best bet.
2. Don’t accept low interest: if you have money in the bank, make sure it is not earning less than the current headline inflation rate. Luckily bank deposit rates are currently at generous levels, 6% is the norm.
3. Make the most of your mortgage: mortgage rates are higher than bank deposits and your home is tax-free so beat both inflation and the bank at the same time by stashing extra cash into your home loan. You can redraw when you need to and pay your house off faster.
4. Search for bargains: in our multi-speed economy some sectors are booming but others are in a hole. Seek out the bargains in those sectors that are suffering. You’ll pay less for stocks or real estate in under-performing areas and be sitting pretty to benefit from the next boom.
5. Don’t overlook risk: going all out for high growth investments is the best way to beat inflation but, be warned, stick with tried and tested investments. High growth also means high risk so don’t commit money that you can’t afford to lose.
Collections: Mortgage News