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How to protect your savings and superannuation from UK inflation | consumer issues

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Interest rates have risen again this week and many savers will see interest rates rise as a result, but inflation, which is currently set to rise to 9.4%, is eroding the value of cash in people’s nests.

Fears of a full-fledged recession are growing as central banks around the world raise interest rates to combat inflation. So, what can you do now to protect yourself from a potential blow to your finances?

Here we look at some options for protecting your nest money and annuity from inflation.

Glue everything to gold.

They say gold is a traditional haven for inflation, but this round it wasn’t. Since March, it has fallen from more than $2,000 (1,655) per ounce to around $1,750 an ounce and is back to about two years ago. It performed better in sterling terms because the dollar gained too much against the pound.

If you want to speculate on gold, you don’t need to buy a cruzerand (South African gold coin). You can invest small amounts through an exchange-traded fund like Invesco Physical Gold, which keeps shiny items in London’s JP Morgan bank vaults.

Gold fell to $1,750 an ounce from above $2,000 an ounce in March. Photo: Slide under the ImageBROKER/Alamy mattress.

This is the stupidest thing you can do with your money. First, home insurance policies typically cover only 500 or 10 million if your home is burned down or money is stolen.

Second, inflation means that the value of cash is always plummeting.

Put it all in a high-interest bank account

It will only make sense if such a thing exists. On Thursday this week, the highest yield on a one-year fixed rate bond was 2.85% at OakNorth Bank. The highest you could get even with a five-year bond was 3.4%. On the other hand, many high street banks pay very little in cash Isa accounts.

In other words, aim to keep your rainy day deposit equal to three to four months of your spending. But it’s not easy with many UK families facing a national fiscal upheaval as consumer champion Martin Lewis said.

Buy stocks that everyone else has sold

Perhaps. But only guess this way if you can afford to lose a lot. U.S. tech companies have been the stocks that have suffered the most in recent months. PayPal has plummeted to $98 a share this week from $285 a year ago. Meta (Facebook) dropped from $370 to $170, and Netflix dropped from $600 to $225 this year alone.

While many high-street banks will pay small sums to your cash Isa account, don’t invest in stocks if you can’t afford to lose. Photo: Andrew Patterson/Alamy

But remember the old stock market adage. Do not catch the falling knife. Just because a stock has fallen 50% in the past year doesn’t mean it can’t go down another 50% next year.

Find a boring investment trust

Some investment trusts have records dating back more than 100 years and hold stocks of relatively low-risk companies that have a good record of regular dividends even during recessions. In such a market, boring would make sense.

Dzmitry Lipski, head of fund research at website Interactive Investor, said: A company that can continue to raise its dividend, along with confidence that inflation will continue to rise, could provide an additional level of comfort, meaning its 154 year performance has suffered many ups and downs.

Interactive Investor also likes Capital Gearing Trust and Personal Assets Trust.

Read our online investment guide at guardian.com/money/2020/sep/12/buy-shares-online-covid-19-rules.

Reduce your pension

Even the most humble employee with a small work pension can change money within the pension. But be careful.

Sold out and reckless trying to monetize is not a good idea. Hargreaves Lansdowns Helen Morrissey

Helen Morrissey, a pension expert at investment firm Hargreaves Lansdown, says the reckless reaction to sell and monetize is not a good idea. She added that pensions are a long-term investment and that holding too much cash can erode your pension.

The performance of large pension funds over the past year has been poor, despite stock prices falling sharply on Wall Street and across Europe. The National Employment Savings Trust’s (Nest) default fund (retirement date of 2040), which holds the pension savings of millions of newly enrolled UK workers, is only a few percent but has actually risen over the past year.

go smart money

Who warned in May of inflation, financial market overcapacity and serious cryptocurrency risks? 91-year-old legendary American investor Warren Buffett. Since then, inflation has soared, the mostly tech Nasdaq index has fallen by about a fifth, and cryptocurrencies have plummeted.

Buffett said that he fears when others are greedy and is greedy when others are afraid.

So what is he buying now? oil company. He invested $27 billion in Occidental Petroleum and Chevron stocks alone. Performance: Occidental stock is up about 100% this year and is unlikely to be followed by anyone concerned about the climate emergency.

Veteran investor Warren Buffett bought stock in an oil company. Photo: Nati Harnik/AP

Buffett is also a big investor in Apple, whose stock has fallen nearly 10% this year. He continued to buy more Apple as his stock fell.

Terry Smith, Britain’s answer to Buffett, said in a letter to investors in July that he was not optimistic about the threat of continued rate hikes.

He says investors should focus on companies that consistently deliver high profits. He added that real estate and real estate are notorious regional markets with low liquidity and high transaction costs, while bonds are not well suited for this situation.

If you like Buffett’s sound, you can buy stock in his tycoon, Berkshire Hathaway. The Smith Fund business is called Fundsmith.

Do nothing, just sit

Not a bad strategy if you’re under 50. Take solace in the thought that your monthly pension contributions will buy more stocks (in the long run) than before when the market goes down.

Sources

1/ https://Google.com/

2/ https://www.theguardian.com/money/2022/aug/06/protect-savings-pension-rising-uk-inflation-interest-rates

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