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What Does Inflation Mean For Your Investments?

UK inflation is rising at its fastest rate for 30 years as fuel, energy and food costs surge.

Inflation is a measure of how prices are changing in the economy. The government calculates it by looking at the change in the cost of a basket of goods and services over time. When inflation is high, it means that the average price of goods and services is increasing rapidly. This can be bad news for your cash because it means that you may not be able to earn a return that keeps up with the rate of inflation. For example, if you have £100 today and it's worth £105 a year from now, your money has only kept up with inflation. It hasn't grown at all. In order to make sure your money grows at least as fast as inflation, you'll need to invest it in assets that have a return that is higher than the rate of inflation.

So, what can you do?

The good news is that it is possible to get an inflation-beating return on your savings, as there are plenty of investment opportunities. But, this involves taking on a little more risk than a cash savings account.

Putting your money in stocks, for example, might help you outperform inflation, while investing in bonds may also be a viable option. Traditionally, government bonds have been considered to be a very low-risk investment with reasonable returns.

Investing might be particularly beneficial if you're looking to save money for a long period of time. Inflation can really eat into your profits over lengthy periods, so you need to make sure that the value of your money outpaces inflation. However, by taking on additional risks than if you kept everything in cash, investing comes with extra risks. The good news is that there are several strategies to reduce your risk, such as picking low-risk assets, spreading your money across many asset classes and so on.

Pros and cons of investing for inflation

Just as there are benefits and drawbacks of different investment options during normal times, the same holds true during periods of high inflation.

The main benefit of investing for inflation is that it can help you maintain the value of your portfolio and preserve your gains' purchasing power. Diversifying your portfolio can also aid in lowering your exposure to risks unique to different asset classes. On the other hand, certain inflation-hedging instruments involve a higher degree of risk.

It's crucial to remember that when long-term investing, it's rarely a good idea to react to short-term circumstances. While it may be worthwhile to make modest adjustments now and then, going overboard might put you in needless danger and stray from your long-term plan.

Before you make a significant shift in your investment portfolio, be sure to consult with a financial adviser who can help you choose the best approach based on your financial situation, tolerance for risk, and goals.

Investment advise with Schofield

Inflation can eat away at your money, but it doesn't have to be if you take the time to create a strategy for overcoming it. Developing a realistic plan, and investing in assets can all assist to minimise the effect inflation has on investments and long-term savings.

We can review your existing investments and savings plans and tell you about the different types of ISAs. We’ll check that you’re on track to meet your savings goals and let you know if you need to take further action.

Call us now on 01423 368000 or email us at

The value of any investment with Schofield Money will be directly linked to the value of the funds chosen. These may fall as well as rise, you may get back less than the amount invested. The bases and levels of taxation, and the reliefs from taxation can change at any time. They are usually dependent on individual circumstances.

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