On the surface, UK investment rates are continuing to improve after reaching 40-year record highs of 11.1% during 2022. We certainly all breathed a sigh of relief when the consumer price index (CPI) rose to just 2.2% in August. But we aren’t out of the dark yet.
While inflation has dropped significantly, prices aren’t necessarily falling – they’re simply rising more slowly than they were. High food prices remain particularly problematic, with items such as olive oil increasing by as much as 37.5% between July 2023-2024. Prices for items like lamb, liver, and tea, have also increased a great deal.
As a result, many people in the UK are still worried about inflation, and some are turning to investment as a viable way to overcome inflation variations. In this article, we’ll consider why, exactly, investments could serve as the best life raft to protect long-term savings when inflation runs riot.
Consumer staples are generally the most impacted by inflation, hence why sectors such as hospitality and tech are still struggling. But the same isn’t true for all sectors. For instance, Forbes identifies certain ‘inflation winners’, like the energy companies who have pulled significant profits during inflation increases.
By diversifying an investment portfolio across these more lucrative areas, it’s possible to both protect your savings from inflation fluctuations and even benefit from price increases overall. This can be a particularly useful outlook as these stocks are typically essentials that consumers will continue to buy regardless of what happens with inflation moving forward. In other words, they’re pretty low-risk investments that could lead to returns regardless of the economy at large.
Increasing Gains Across Countries
While inflation issues have impacted a great many countries in the wake of things like COVID and the Russian invasion of Ukraine, not all countries are currently suffering. For instance, current inflation rates in China were at a mere 0.6% in August 2024. By investing in stocks within companies that are enjoying these more favourable inflation rates, it’s easier to protect your money from current country-based inflation risks, as well as increasing the earning potential of those investments. Simply conduct technical analysis (TA) to consider things like current inflation rates alongside exchange rates and other crucial indicators of a stock’s viability.
Decentralising Your Currencies
Inflation impacts cash, but decentralised investments, which could include buying Bitcoin or investing in non-cash assets like gold and silver, can all help with wealth regardless of inflation. Investment in property assets can also prove effective for protecting from inflation through outlets like rental income. Do note, though, that UK banks often increase interest rates to deal with inflation, which could impact the viability and financial security offered by alternatives like property.
Takeaway
Inflation in the UK has undeniably improved, but it would be naive to assume that we’re entirely out of the danger zone. This is especially true as prices on key commodities continue to increase, albeit at a slower pace, and highlights the need to protect finances with informed decisions such as an investment portfolio.
