Protect your wealth with adequate investment
Inflation had been almost absent from the market’s language for the previous three decades, until it reappeared with force in 2021. Because rising inflation is expected to continue in 2022, finding ways to create larger returns on assets will be an important investing topic. If it’s not confronted, your wealth could easily depreciate. To invest your way out of inflation will take some planning and thought. It is not easy to battle such a steep rise in the cost of living.
Let’s take a look at some of the more detailed reasons that we are seeing such high inflation. We’re also going to go over how you can invest your way out of inflation and stop your money devaluing.
The root cause of such rapid recent inflation
Inflation has been growing for two main reasons: supply and demand. Starting with the latter, customers have gone on a shopping frenzy after spending so much time at home binge-watching Netflix in 2020 and 2021. There was a lot of spare money for most people which saw demand for goods increase rapidly.
The primary cause of the present increase is the worldwide price of energy. This has resulted in higher energy and transportation prices for enterprises, which many of them pass on to their customers. Businesses are also continue to be impacted by supply issues and increasing transportation costs. On top of this, it is more costly for the average person to travel and indulge in leisure activities. There have been many reasons for this increase including global conflicts, supply chain issues etc.
What the future of the UK economy looks like
The phrase ‘transitory’ was used by central banks to describe inflation, but it now appears that the word ‘persistent’ has taken its place. As a result, inflation will continue to be a major economic concern in 2022.
The Bank of England (BoE) forecasts that inflation will exceed 7% by spring 2022 and then begin to decline. That’s because most of the factors that have contributed to the present high rate of inflation are temporary. It’s improbable that energy and imported goods costs would continue to climb at the same rate as they have recently. As a result, inflation will gradually decrease.
Wise investing can tackle inflation
To beat inflation, an investment must provide better returns than the rate of inflation in the economy. If your return on investment is less than the rate of inflation, your gains may be effectively nullified. Every year, the purchasing power of money diminishes considerably due to a variety of factors.
Investing with inflation in mind is critical for safeguarding your current and future wealth, and it entails selecting assets that rise in price organically. Real, physical assets or investments that pay a variable rate and appreciate or rise over time are the most common examples.
If you already have an emergency fund or a large sum of cash in the bank, it may be time to invest part of it to preserve your wealth from inflation. Over time, investing part of your money may offer you a greater chance of defeating inflation. Every persons needs and financial circumstances are different though. What may work for you may not for the next person. And that is where a fully independent financial advisor comes in handy. We can help you assess your finances and use your funds to grow rather than shrink with inflation. Please contact us to explore your alternatives.
Equity Release plans are not right for everyone and it is important that you fully consider your options and receive independent financial advice before making a decision. It is also important that, if you do decide to use an equity release product, you choose one that meets your needs.
Remember that taking an equity release plan is generally a long term option. However, there are flexible plans available that may fit your varying needs and some will allow you to repay in the future without penalties.
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