There is a lot of talk at the minute surrounding inflation, as many western nations witness some of the strongest price hikes in over a decade.
The US economy has been experiencing the highest inflation rates increases for over four decades. With the cost of living in the US continuing to snowball due to the conflict in Ukraine, it's clear that stability for the masses is still far from certain.
The same can be said here in the UK, with current rates hovering around 5%, resulting in many struggling to make ends meet through growing food and fuel prices. Analysts have outlined how this rate is expected to creep past 7% as we enter the next quarter, hampering the economic recovery we have seen over the previous 12 months.
Despite the end of nearly all the legal restrictions established due to the pandemic, households are more likely to think twice before having that extra meal out or making their usual impulse purchases.
So, given the current challenges we face, is there anyways we can limit or even beat ever more biting inflation rises?
Gold
Gold is one of the earliest forms of inflation protection. Between September 2001 and September 2021, this precious metal has seen an average annual growth of 9.48%. Inflation averaged 2.4% over the same period, giving investors a 7.08% return.
While gold delivers healthy growth with a lower risk of a bubble market, there are challenges in both physical and mutual funds. The cost of storage and insurance can eat into your returns, and you will also need to know whether the goal of your chosen fund is to track the price of gold or to invest in gold mining firms. These choices can impact your outcome significantly, so understanding the nuances is critical.
Stocks
Investing in a diverse stock portfolio is an excellent alternative to beat growing inflation. The S&P 500, an essential indicator for the US stock market, achieved an average return of roughly 9.5% from September 2001 to September 2021. After adjusting for inflation, you could expect a yearly return of around 7%.
Whilst this is a healthy return, it's worth considering that stock investing is never without risk. Short-term losses are possible, and stock index funds do not allow you to choose the fund's investment firms. Again, unless you invest through a platform that manages/tracks another broker, you can expect an investment that requires constant care.
Property
Compared to the stocks and commodities markets, property investment will offer a much lower level of volatility in the current climate. By building a solid portfolio, you can reduce much of your financial exposure whilst benefit from the knowledge of owning a tangible asset.
North West cites such as Liverpool and Manchester have experienced some impressive property price increases, representing about 20% per year, with rental returns approaching around 10%. North West developers tend to offer a completely hands-free model, perfect for anyone looking for a painless monthly income. With demand still outstripping supply, now more than ever is the time to invest in the UK property market.
