It is no secret that rising inflation is becoming a global issue. In the US, inflation is at a 40-year high, whilst other parts of the world, like the UK with its 30-year inflation high, are also experiencing multi-decade high inflation rates.
As governments and central banks introduce stimulus and policies aimed at combatting inflation, what can you do to offset rising inflation? Here we discuss 5 top tips to offset rising inflation.
1. Cash is NOT King
Advancements in technology have made it a darn sight easier for people to store and accumulate wealth in alternative assets. Many of these alternative investments offer a solid hedge against the inflation we are seeing in fiat currencies. The traditional cash and Fiat currencies are far more vulnerable to depreciation due to the widespread printing of money. Even more so, over the last few pandemic-ravished years. In stark contrast to fiat currency, the finite nature of alternative investments such as cryptocurrencies, precious metals, and real estate means they are not impacted by inflationary pressures which can dictate fiat currency. For personal investors seeking to hedge against fiat inflation, it is necessary to spread the risk and find a balance between these assets. Always avoid putting all your wealth into just one asset alone anyway!
2. Empty Your Current Accounts
If you have any money sitting in current accounts, it is losing you money. Typically, a current account will offer less than 1% interest, 2% if you are lucky. This, when set against an inflationary backdrop of over 5% means keeping savings or superfluous money in a current account is the last thing you should be doing at the moment. Revaluate what can be put into more yield-bearing accounts, savings accounts, and offshore financial accounts. Then, only leave the minimal in a current account.
3. All That Glitters is Not Gold, But…
All that glitters may not be gold, but gold certainly does glitter, especially in a time of rising inflation. Gold or investment in Gold-related assets should always be considered an essential part of any investor’s portfolio. Gold is the original safe-haven asset and despite a multitude of crashes within multiple markets over hundreds of years, Gold has proven to be a safe investment. It is traditionally the best hedge against the USD. As we discussed in point number 1, currencies like the USD are impacted heavily by rising inflation.
4. Don’t Forget Silver
The ‘other’ precious metal – Silver – can glitter just as much as gold as an offset against inflation. Silver is normally more volatile than gold, going up and down in price with wider margins than gold. Some see Silver as a bad investment due to its volatility. However, demand for Silver on a global scale is increasing, not least because it is a vital component in building electric vehicles (EVs).
5. Bricks and Mortar
When it comes to offsetting against inflation, it would be wrong not to talk about investing in real estate. Over the years, and despite different house price crashes, investing in real estate has proven to be a reliable hedge against inflation. Timing is obviously important and when there are signs that the housing market is cooling, you would be right to be hesitant about investing in real estate. However, if you are in it for the medium to long term, investing in real estate is a reliable way to offset rising inflation. You can read more about investing in the real estate industry.
