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Investing During Inflation: Should You Change Your Strategy?

Byadmin

Sep 22, 2022

Investing in times of political and economic uncertainty is tricky. However, it’s appropriate to respond to a challenging financial period with greater scrutiny on how you’re managing your money. Part of this includes analysing your investments to make sure you have the best strategy for the situation you’re in.

The rate of inflation in the UK has increased dramatically and this means your money won’t go as far as it once did. Even so, you may still want to expand your investments, especially if your salary doesn’t go as far. During inflation, if the investment is the goal, should you be altering your approach or staying the course?

Potential opportunities

If you have some financial capital upfront to invest, the initial cost of investing in some areas will likely reduce alongside a potential recession ahead. For example, the cost of property may reduce soon, so it’s wise to watch the market from a diverse perspective too.

Overall, it’s wise to look into opportunities with stocks. You may have invested in bonds previously, but this isn’t the most ideal choice during times of high inflation. As they’re an asset with a fixed income, an inflated economy hits them harder. Goods and services are generally sold at a higher price during times of inflation and stocks reflect company profits. As such, stocks are the more sensible choice.

You should also be aware that most savings accounts offered by financial institutions are unlikely to offer interest rates equal to inflation.

Strategy changes

You mustn’t change your investment strategy too often. You often need to give your approach some time to work. Funds can go up and down and there are some periods in an investment’s lifecycle which are critical to it producing a return. If you switch up your plan too quickly, you won’t give your investment time to level out.

If your circumstances change or you think it’s time to improve your investment portfolio, look into professional investment management to maximise your returns and set yourself up for the future.

You may find that once you establish a new plan then you’ll need to remain consistent. This means you need to make sure you’re happy with the risk level you choose and the length of time you commit to. To do this, you should consider where you are in your life stage, e.g. how close you are to retirement.

In times of high inflation, you should be wary about locking all your cash assets away in long-term investments. Make sure you leave enough available to help you through the immediate economic uncertainty of everyday life.

By admin