Avoiding inflation
Discussion
What’s are some tips to avoid savings being eroded by inflation? I have a sense the governments will try and inflate us out of the covid borrowing mess.
I have children and worst case 30 years to retirement but hopefully less. Own 40% of the house or just under.
If we have extra cash, there seem to be a few places to put it. Pension which avoids income tax and NI, I’d assume they are mostly invested in equities but I need to double check. I can buy shares in the privately owned company I work for which should list in 5-10 years.
Is it a bad idea to over pay on the mortgage? As I’d imagine house prices will rise with inflation so essentially I am getting the gains of the mortgaged part for ‘nothing’ - beyond the low 1.5% interest rate anyway. So it seems if inflation was running at 5% why pay down debt at 1.5% if you can find something to track inflation?
The house doesn’t need any major work or extensions .
Or will mortgage rates increase with inflation? Given how leveraged the housing market is, is that surely a recipe for economic disaster and thus the government won’t do that?
We’ve debated an index tracker but torn - the pensions are already heavy on equities and they benefit from 40% saving from tax. Being a pessimist I am also a bit concerned despite all the covid problems some of them have hit record highs - pain to come later?
If it’s possible for mortgage rates to be low, inflation high, provided you have secure job would be stupid to mortgage yourself up to the eyeballs and reap the (paper) gains of house prices rising faster than the interest rate? The wife has no interest in moving so somewhat theoretical but. And I guess you’d have to downsize again after to get your money out, which may be hard to do as you’ve got used to a certain standard.
I have children and worst case 30 years to retirement but hopefully less. Own 40% of the house or just under.
If we have extra cash, there seem to be a few places to put it. Pension which avoids income tax and NI, I’d assume they are mostly invested in equities but I need to double check. I can buy shares in the privately owned company I work for which should list in 5-10 years.
Is it a bad idea to over pay on the mortgage? As I’d imagine house prices will rise with inflation so essentially I am getting the gains of the mortgaged part for ‘nothing’ - beyond the low 1.5% interest rate anyway. So it seems if inflation was running at 5% why pay down debt at 1.5% if you can find something to track inflation?
The house doesn’t need any major work or extensions .
Or will mortgage rates increase with inflation? Given how leveraged the housing market is, is that surely a recipe for economic disaster and thus the government won’t do that?
We’ve debated an index tracker but torn - the pensions are already heavy on equities and they benefit from 40% saving from tax. Being a pessimist I am also a bit concerned despite all the covid problems some of them have hit record highs - pain to come later?
If it’s possible for mortgage rates to be low, inflation high, provided you have secure job would be stupid to mortgage yourself up to the eyeballs and reap the (paper) gains of house prices rising faster than the interest rate? The wife has no interest in moving so somewhat theoretical but. And I guess you’d have to downsize again after to get your money out, which may be hard to do as you’ve got used to a certain standard.
If you’re in for the long term (like 10 years+), then your best bet is to take a little more risk. You can dial it up or down as you want (e.g. ETF on developed market index vs. emerging market special situations fund), but all other things being equal over a longer terms higher risk investment will generate higher returns.
They they might want to, but whether they manage it is a different question. Inflation seems stubbornly low right now.
What kind of thing would trigger sharp inflation in next couple years? Can’t see taxes going down. Printers are keeping the idle accounted for. What’s left?
Not a rhetorical question. Genuinely interested in the answer? It’s a mystery to me.
What kind of thing would trigger sharp inflation in next couple years? Can’t see taxes going down. Printers are keeping the idle accounted for. What’s left?
Not a rhetorical question. Genuinely interested in the answer? It’s a mystery to me.
I’m generally of the view that globally, the sheer amount of money being launched into the economy will need to find a home eventually. It’ll filter down from wherever it initially landed (in the U.K. its generally been aimed at workers whereas in the US it’s been thrown at business) and end up in assets.
I think if it’s either equities or property you’re fairly well positioned to not fall behind. With that in mind, I still see something diverse like Vanguard LS100/global equity tracker etc. as a decent home for your cash. It’s liquid, cheap to own and fire-and-forget.
I think if it’s either equities or property you’re fairly well positioned to not fall behind. With that in mind, I still see something diverse like Vanguard LS100/global equity tracker etc. as a decent home for your cash. It’s liquid, cheap to own and fire-and-forget.
Everything points to inflation but as pointed out Quantitative easing has been going on for a while and no huge inflation, but then BT did just increase prices by 3.4% + cpi I think it was. May be it's just starting.
Some think they'll be a deflationary period first, everything is a bit 'bubbly' after all.
So who knows! I honestly don't think right now that having some cash is a bad thing, perhaps just consider where it might be best placed but don't rush into anything?
Some think they'll be a deflationary period first, everything is a bit 'bubbly' after all.
So who knows! I honestly don't think right now that having some cash is a bad thing, perhaps just consider where it might be best placed but don't rush into anything?
Scootersp said:
Everything points to inflation but as pointed out Quantitative easing has been going on for a while and no huge inflation, but then BT did just increase prices by 3.4% + cpi I think it was. May be it's just starting.
Some think they'll be a deflationary period first, everything is a bit 'bubbly' after all.
So who knows! I honestly don't think right now that having some cash is a bad thing, perhaps just consider where it might be best placed but don't rush into anything?
There hasn’t been much inflation of day to day goods since QE, but there has been significant asset inflation - stock markets, property, gold.Some think they'll be a deflationary period first, everything is a bit 'bubbly' after all.
So who knows! I honestly don't think right now that having some cash is a bad thing, perhaps just consider where it might be best placed but don't rush into anything?
https://inflation.iamkate.com/
obviously that website is missing very latest figures, but 2 to 5% over the last 10 years isnt trivial e.g. you bought a house 10 years ago for £300k, it needs to be worth £400k now just to have maintained value. You £40k salary should now be £54k etc....its surprising just how much things have "gone up" just in 10 years.
We all hear in the news how the inflation figures are "low" and the odd percent or three here and there does not sound like much but the reality is few savings accounts are even matching inflation these days, and many employers dont keep up with inflationary pay rises, so the longer you stay with the same company, the less you earn each year.
Outside of boom areas I wouldn't bank on property maintaining value in line with inflation either...its not a dead cert anymore, particularly if you bought near the last boom cycle.....
I dont know what the answer is either, other than keep investing in a variety of world funds...at least inside a SIPP you get the 40% tax relief to get you started.....
obviously that website is missing very latest figures, but 2 to 5% over the last 10 years isnt trivial e.g. you bought a house 10 years ago for £300k, it needs to be worth £400k now just to have maintained value. You £40k salary should now be £54k etc....its surprising just how much things have "gone up" just in 10 years.
We all hear in the news how the inflation figures are "low" and the odd percent or three here and there does not sound like much but the reality is few savings accounts are even matching inflation these days, and many employers dont keep up with inflationary pay rises, so the longer you stay with the same company, the less you earn each year.
Outside of boom areas I wouldn't bank on property maintaining value in line with inflation either...its not a dead cert anymore, particularly if you bought near the last boom cycle.....
I dont know what the answer is either, other than keep investing in a variety of world funds...at least inside a SIPP you get the 40% tax relief to get you started.....
Edited by bogie on Thursday 25th February 17:49
Diversification with a bias toward utilities and possibly some contrarian positions, although maybe not Brazil
Your house while it is an asset, should not be considered an investment, unless you are into camping. However do a few sums to see how a 1 or 2% increase in rates would affect your personal cash flow. You can then decide whether to pay a bit extra in that direction or not
If you are averse to equity at this time (understandable) then possibly a variable rate Dollar bond fund from a major fund family. Default rate is low but you would have some currency exposure. That would handle the inflation angle but not enrich you.
inflation need not necessarily be something to be feared, utilities and major corps with overseas earnings often do quite well. Banks too, although they are subject to political criticism via the press if they do well. amongst your contrarian choices you could look at sectors that would benefit from a decline in Covid, So maybe Whitbread (example only) and Visa is nearly always a safe bet with increased spending
Your house while it is an asset, should not be considered an investment, unless you are into camping. However do a few sums to see how a 1 or 2% increase in rates would affect your personal cash flow. You can then decide whether to pay a bit extra in that direction or not
If you are averse to equity at this time (understandable) then possibly a variable rate Dollar bond fund from a major fund family. Default rate is low but you would have some currency exposure. That would handle the inflation angle but not enrich you.
inflation need not necessarily be something to be feared, utilities and major corps with overseas earnings often do quite well. Banks too, although they are subject to political criticism via the press if they do well. amongst your contrarian choices you could look at sectors that would benefit from a decline in Covid, So maybe Whitbread (example only) and Visa is nearly always a safe bet with increased spending
I dont see how anyone can get excited about the prospect of paying someone to store some illiquid gold.
The governments have been trying to stir inflation since 2008 with no success and they probably wont manage it this time.
On top of that, holding productive businesses provides the same protection to inflation, yet they generate an income in the mean time.
The governments have been trying to stir inflation since 2008 with no success and they probably wont manage it this time.
On top of that, holding productive businesses provides the same protection to inflation, yet they generate an income in the mean time.
Benbay001 said:
I dont see how anyone can get excited about the prospect of paying someone to store some illiquid gold.
The governments have been trying to stir inflation since 2008 with no success and they probably wont manage it this time.
On top of that, holding productive businesses provides the same protection to inflation, yet they generate an income in the mean time.
You could do sort of both and own some major gold miner shares?The governments have been trying to stir inflation since 2008 with no success and they probably wont manage it this time.
On top of that, holding productive businesses provides the same protection to inflation, yet they generate an income in the mean time.
Some pay a dividend, are at pre covid levels despite Gold still being above pre covid levels and have good p/e ratios, low debt, high cash balances, so a decent solid business and then you have lots of potential if gold moves up.
Inflation. Running briefly out of control to enable rates to rise.
Big mess. Deflation arrives. Rates cut. Back to where we were in 2008.
Begin again.
Covid19s fault. Not bankers or bad fiscal policy.
Green revolution.
My gut feeling is to put 50pc of spare cash into mortgage and 50pc into anything green that a politician has connections with.
Big mess. Deflation arrives. Rates cut. Back to where we were in 2008.
Begin again.
Covid19s fault. Not bankers or bad fiscal policy.
Green revolution.
My gut feeling is to put 50pc of spare cash into mortgage and 50pc into anything green that a politician has connections with.
Rereading your opening post, you are in a great position to read the business you are working for and investing there might be lucrative, if you like it/rate it's service/product then I'd put at least some into that.
I also wouldn't rush into anything particularly, if it's been on the sidelines a while a little longer won't hurt while you make sure of where you want to put it. If holding long term it ideally needs to be something you believe/like, then if/when it drops and on paper you've lost money you don't mind holding and waiting it out.
I also wouldn't rush into anything particularly, if it's been on the sidelines a while a little longer won't hurt while you make sure of where you want to put it. If holding long term it ideally needs to be something you believe/like, then if/when it drops and on paper you've lost money you don't mind holding and waiting it out.
Simpo Two said:
Mr Whippy said:
My gut feeling is to put 50pc of spare cash into mortgage and 50pc into anything green that a politician has connections with.
And yet we know that most 'green' stuff doesn't add up without massive subsidies. It just happens to be fashionable. Like blue tulips?Just make sure you choose the same winners as the government.
Simpo Two said:
Mr Whippy said:
My gut feeling is to put 50pc of spare cash into mortgage and 50pc into anything green that a politician has connections with.
And yet we know that most 'green' stuff doesn't add up without massive subsidies. It just happens to be fashionable. Like blue tulips?NRS said:
Simpo Two said:
Mr Whippy said:
My gut feeling is to put 50pc of spare cash into mortgage and 50pc into anything green that a politician has connections with.
And yet we know that most 'green' stuff doesn't add up without massive subsidies. It just happens to be fashionable. Like blue tulips?If businesses are already there without subsidy and market demand will supply the necessary impetus, then there will be no need for ‘building back’
It’s only just started.
Wide scale rebuilding/replacement of everything you can shake a green coloured stick at.
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