How to protect savings against inflation?
Discussion
Probably a little late to be working this out on my part, but many clued up people on here and it looks as though this issue will be present for 2022....
What's the general consensus here for hedging savings against inflation, at least in part, and in the short term, in a readily accessible format?
I'm sure the exotic bitcoin/Rolexes/Classic Car methods etc will be mentioned, but the volatility and bid/ask spread of some of these hasn't worked out for me in the past.....!
What's a good "steady eddie" inflation beating/lessening method of storing money that can be got at easily and quickly, other than sitting in my current account?
Cheers
What's the general consensus here for hedging savings against inflation, at least in part, and in the short term, in a readily accessible format?
I'm sure the exotic bitcoin/Rolexes/Classic Car methods etc will be mentioned, but the volatility and bid/ask spread of some of these hasn't worked out for me in the past.....!
What's a good "steady eddie" inflation beating/lessening method of storing money that can be got at easily and quickly, other than sitting in my current account?
Cheers
If you absolutely, totally need an absolute guarantee that you can access 100% of your capital tomorrow with zero risk, then you don't have any decent interest-bearing choices.
If you have a horizon of longer than a few months, and can tolerate even a small amount of risk, then investing in a global tracker of some kind within an ISA wrapper is most unlikely to lose you money. Over a few years, it's a virtual certainty that you'll come out reasonably up on the deal.
If you have a horizon of longer than a few months, and can tolerate even a small amount of risk, then investing in a global tracker of some kind within an ISA wrapper is most unlikely to lose you money. Over a few years, it's a virtual certainty that you'll come out reasonably up on the deal.
I've been thinking about this recently. The challenge is that we don't know if/when there will be a significant market correction or full on crash...it will happen at some point and then the question is if you are invested into 100% Equities and especially in a tracker with a narrow set of investments (e.g: S&P500) are you comfortable with potential 30/40% or greater drops on the value of your investments?
All my investments are 100% Equities but taking something like Vanguard VLS 40 as an example, during the last 10 years there were no significant drops during any year...I do wonder if VLS 40 or a similar product could be used to hedge against inflation without taking significant risk? Though the next 10 years may be completely different to the last 10 years so maybe a flawed comparison.
All my investments are 100% Equities but taking something like Vanguard VLS 40 as an example, during the last 10 years there were no significant drops during any year...I do wonder if VLS 40 or a similar product could be used to hedge against inflation without taking significant risk? Though the next 10 years may be completely different to the last 10 years so maybe a flawed comparison.
Ryan_T said:
Between one extreme of it being in a savings account and the other of crypto you could be maxing out your S&S ISA yearly and using VUSA / VWRL.
My Stocks and Shares ISA's are doing very well and seem to be readily accessible. I have mine with Fidelity set up by my finacial advisor.https://www.fidelity.co.uk/stocks-and-shares-isa/
Ryan_T said:
Between one extreme of it being in a savings account and the other of crypto you could be maxing out your S&S ISA yearly and using VUSA / VWRL.
Basically the same conclusion I eventually came to when I realised 0.5% in a Marcus account was an utter waste of time. I can recommend Vanguard, it is really easy to use and the fees seem very reasonable.PopsandBangs said:
What's a good "steady eddie" inflation beating/lessening method of storing money that can be got at easily and quickly, other than sitting in my current account?
Easy & Quick are subjectiveDo you need instant access, or can you wait a few days ?
How many buttons are you prepared to press to cash out a position & transfer the proceeds ?
Do you have any tolerance for loss ?
A S&S ISA invested in something 'cautious' or 'defensive' or 20-40% Equity are likely to be around the level of tracking inflation without significant downside risk.
Anything closer to 100% equity is likely to be more of a rollercoaster - long term returns likely higher, but can be painful short term - though that only matters if you need to withdraw he funds.
Carbon Sasquatch said:
A S&S ISA invested in something 'cautious' or 'defensive' or 20-40% Equity are likely to be around the level of tracking inflation without significant downside risk.
Anything closer to 100% equity is likely to be more of a rollercoaster - long term returns likely higher, but can be painful short term - though that only matters if you need to withdraw he funds.
Also people need to remember that they can go down as well as up. My six tanked when Covid hit but luckely most have recovered.Anything closer to 100% equity is likely to be more of a rollercoaster - long term returns likely higher, but can be painful short term - though that only matters if you need to withdraw he funds.
Cotty said:
Also people need to remember that they can go down as well as up. My six tanked when Covid hit but luckely most have recovered.
"Luckily"?It would have been astonishing if they hadn't. That's the thing with the markets - yes, they can and do go down. But historically speaking, 100% of the time they have gone back up again.
Simpo Two said:
Historically, what have people done in times of high inflation?
(not that 5% is high, we've just got used to having it very low and stuff has fitted in accordingly)
Historically, governments bankers would have raised rates to combat inflation, but they can't do that much now as the debt everywhere is huge and the result could/would be a market (stock and housing) crash and other asset prices crash?(not that 5% is high, we've just got used to having it very low and stuff has fitted in accordingly)
Right now if you take the 5% (and it's probably higher) and you take a generous 1% interest rate that's a 4% annual loss in cash, so 5% may not sound bad but it's worse for some than if you had 10% inflation but rates at 10% at least savings wise you'd hold station!?
Currently the situation, hits the poor hardest, they live hand to mouth and their costs are increasing above their incomes, then the middle class/boomers will gradually have their savings diminish through inflation but also through these increased food/energy costs. There is some status quo/normality though and not lots of loan/mortgage defaults (that high rates would bring) so the most palatable option perhaps but potential for storing up problems for the future?
People have been looking for 'outs' and money has to have moved into assets in general these last few years, just like the OP is looking to do, the realisation of inflationary effects (that yes haven't been prevalent in a long time) is starting to hit everyone.........energy caps and companies failing hitting the news, fuel pump prices, new electricity dd's shooting up as a consequence, it all starts impacting people directly and not subtly. Everyone's old 'pools' (showing my age) or lottery win dream had a scenario where they'd just bank the win and live off the interest for ever.........not possible now! Never any concern back then about £80K odd max in one bank, they were (or at least seen to be) safe as houses.
So OP there is an argument for having cash in anything other than cash, "cash is trash" is a buzz phrase, however some cash is still a good reassurance and once cash is placed in an asset it can be hard to get back and/or can reduce (is everything peaky now?), the age old risk/reward of investing/speculating, but what is not there is a prudent option an option for the plain person (me) who just wants to preserve wealth and that in itself points towards issues with the system as it stands.
So arguably if the inflation continues then perhaps everything that's essential in the world does proportionally better than everything that's a luxury?
Perhaps find a historically cheap commodity, that's needed in society and buy it, it's ETF or the company that grows/mines it?
My safe nature forced into doing something has chosen largely but not exclusively Silver, I suggest to you/everyone that you research things and make a choice on something you personally believe in and can stick to through a low point if (when) one occurs with your choice. As you need access then I'd say work out what you can leave long term and put that somewhere.
A well managed Vanguard etc type fund should perform well and is far more mainstream than my suggestion, but it'll also potentially test you with a downside at some point that'll you'll need to ride out.
Best of luck to all with there choices, I still maintain the lack of a safe/steady wealth preserving option is a failing of central bankers/governments and is not helpful or desirable for stability and does point to serious fundamental problems in the 'system'.
xeny said:
deckster said:
But historically speaking, 100% of the time they have gone back up again.
Has Japan finally made it back to the peak from 1989 ?
to be fair though, there was no claim of back up to the same level.....Nikkei 225 peaked around 39,000 and has been under 7000 since (ouch) - currently hovering around 30,000
That's why diversification is important though....
xeny said:
deckster said:
But historically speaking, 100% of the time they have gone back up again.
Has Japan finally made it back to the peak from 1989 ?I'd be more interested to know some information about the worst historic periods of market performance from a global equity total return perspective in real terms. I'm sure there will be more than a few periods > 3 years.
deckster said:
Cotty said:
Also people need to remember that they can go down as well as up. My six tanked when Covid hit but luckely most have recovered.
"Luckily"?It would have been astonishing if they hadn't. That's the thing with the markets - yes, they can and do go down. But historically speaking, 100% of the time they have gone back up again.
Your 'sure thing' mindset is probably indicative of most people to be honest (as their lifetimes have known nothing else) and I'm not critising it beyond the inference that there is so little risk of either an extended period of downside before getting back to ath's or never getting there in the remainder of someone's life time?
But then you are probably right they will keep supporting the market but it's not certain they can/will forever and if they keep putting off free market corrections then arguably the ultimate correction will be larger when it comes.
LeoSayer said:
I'd be more interested to know some information about the worst historic periods of market performance from a global equity total return perspective in real terms. I'm sure there will be more than a few periods > 3 years.
I've been reading up recently - trying to figure allocation buckets for my soon to be retirement.Most of the data is US centric as you'd expect. Morningstar had a good article last year
https://www.morningstar.com/articles/1028407/in-lo...
The trend does seem to be shorter recovery times - it seems more people of the view of it will always bounce back & buy the dip
I'd consider wealth preservation (horrible name but that's what it is) funds or trusts like Capital Gearing, Personal Assets or Ruffer.
They're investments and they'll still move around a bit but hopefully much less than anything 100% equities will.
It sounds like you know this but these aren't a substitute for cash if you need the stability and availability of cash being there when you need it.
They're investments and they'll still move around a bit but hopefully much less than anything 100% equities will.
It sounds like you know this but these aren't a substitute for cash if you need the stability and availability of cash being there when you need it.
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