It’s always important to incorporate inflation into your money making plans, even more so now that COVID-19 is causing the economy to stumble. Now is the time to prepare your investments for inflation.
Your 20K now isn’t going to hold the same value this time next year. Inflation is a natural part of our lives, our economy, and it’s not going anywhere. It’s essential that we learn to adapt and not only maintain our money, but learn how to grow it.
The first step is learning about your investment, how it affects them and inflation proof investments that will help you continue to deliver even in trying times.
Let’s start by looking at what inflation is.
Inflation is constant and unpredictable, but unless you hold a close relationship with your money and investments the concept of inflation may be a foreign one. Luckily, once you’ve wrapped your head around inflation it’s actually quite simple.
Inflation in its simplest form is a quantitative measure of the rate at which the price of available goods and services rises. Resulting in a considerable and continuing drop in your purchasing power over a period of time.
Inflation is very much dependent on the state of the economy at the time, it can drift anywhere between 1% (low inflation) and 5% (high inflation), meaning that your money is worth say 3% less this time next year.
Many different factors contribute to inflation, the price of labour, production, demand, all feed into inflation. As much as inflation can seem all doom and gloom, from an investment standpoint it presents a golden opportunity that is often overlooked.
No matter what investment strategy you’re undertaking inflation will have an impact on it, whether positive or negative.
For some investment strategies such as fixed investments, inflation can cause some bumps in the road, whereas investments that are subject to change such as real estate can see a real benefit.
It’s always important to be mindful of inflation when investing, but certainly now during the Coronavirus pandemic, this could see the economy struggling and inflation rising.
Low interest savings accounts can see no real value, or even worse, lose value. However, some investments are inherently indexed for inflation, and as such such rise with inflation to create essentially a ‘inflation proof investment’.
Unfortunately, savings, especially low interest savings accounts ordinarily can contribute little to no impact already, add in inflation and you could actually be losing money.
Brick and mortar banks tend to offer the lowest interest rates, resting around 0.05% – sometimes even with certain conditions. You would have the best luck investing your money with an online bank, as they usually provide better interest rates around 1-2%.
Inflation in the UK has fluctuated quite dramatically over the years, with 2011 seeing an inflation rate of 4.46% dropping to 0.04 in 2015, averaging now at about 1-1.5%.
Often savings accounts don’t generate enough of a return to keep up with inflation, nevermind beat it. Which may leave you searching for more lucrative, high yield investments.
This is where inflation proof investments come in.
There are many inflation proof investments out there, it just may require some initial digging to uncover the best ones.
Inflation investments are essential during periods of economic uncertainty, inflation protected securities (or IPS) can provide a real return that other investments just can’t compete with.
Inflation can present many challenges in finding a rewarding investment option, luckily commodities work as a sort of hedge against inflation.
Inflation and the prices of commodities have a unique relationship, in that when inflation rises so does the price of commodities. Resulting in you making a considerable return when inflation is high, and a loss if inflation is low.
Commodities cover a wide range of products, these can be split into two distinct categories; hard and soft.
Hard commodities cover anything that need to be mined or drilled, such as metal, crude oil, gold etc. while soft commodities are acquired through less strenuous means such as wheat, vegetables, i.e. anything that can be grown.
You can invest in commodities through exchange traded funds (or ETFs).
Bonds can seem like a slightly odd choice for inflation investments due to fixed assets generally seeing a loss. Yet, bonds can make quite remunerative investments if you manage to get your hands on the right ones.
Inflation-indexed bonds make for a good option, due to how they are built. These bonds are directly linked to the rate of inflation or retail price index (RPI) and therefore rise in value when the RPI goes up.
However, it does require further research depending on whether you’re looking for a short-term solution to inflation, or you’re looking for a very long-term solution such as for a pension.
Leveraged loans are possible of the riskiest investment options mentioned, as they carry much higher risks of defaulting.
A leveraged loan is a type of loan that is provided to companies or individuals with already large amounts of debt or a poor credit history.
The interest rates on these loans are often much higher than standard loans as the rate of defaulting is considerably higher. These large interest rates make it more costly for the borrower, but more beneficial to the lender and investors.
As leveraged loans are classed as collateralized loan obligations (or CLOs) they work as a hedge against inflation. This is due CLOs usually having a floating rate yield, resulting in investors benefiting when the interest rate rises.
Real estate can be a very popular option for inflation proof investments as not only do the rising prices increase the resale value of the property, but also can generate fixed income in the meantime by renting.
Coincidentally, the price of rent can increase overtime to keep up with the rate of inflation earning you more return on your investment.
There are various routes you can take when investing in real estate. You can acquire the property yourself and have direct ownership, or invest in real estate investments trusts (REIT).
The only downside to REITs is they are generally low growth due to 90% of the income generated being paid back to the investors, leaving only 10% to reinvest. On top of this, they are accompanied with market risk and taxed as regular income.
Car leasing may seem an odd investment when talking about inflation, but its combination of residual income and final lump sum can contribute to a diversified portfolio. This can work to create a hedge against inflation, protecting you from seeing a considerable loss.
We’re all familiar with the concept of ‘buy to let’, most prominently in property. Investing in car leasing provides an opportunity to do the exact same thing, but with an asset that is more in demand and just as lucrative.
While investing in car leasing doesn’t provide as clear a picture as say investment-protected security, it does provide reliable, residual income and a high rate of return.
We know what you’re thinking that sounds great – but how exactly does it work?
Here at Buy2LetCars we work hard to ensure that your investments are met with a high return that beats the cost of inflation. Our entire business model is built on transparency and trust, creating strong relationships with our customers.
When you invest with Buy2LetCars your money is invested over a period of three years, in which time you will receive monthly installments on top of a considerable lump sum right at the end.
The rate of interest in which you would receive is calculated based on the amount invested, with the minimum interest rate being 7% and the max reaching a whopping 11%.
Building a diversified portfolio through diversifying your investments is key in weathering the storm and ensuring you come out on top overall. Preparing for inflation can see your pool of assets diversify even further to combat this.
Buy2LetCars provides a tangible investment that generates passive income and a sizable chunk right at the end, making for a perfect investment to add to your portfolio.
There are many different ways to diversify your portfolio, location, sector, interest risk etc. but the best way is to have a diverse portfolio of assets.
The main aim of inflation proof investments is to anchor down and endure the change, while managing not only to maintain your money’s worth but to build on it.
Investing with Buy2LetCars is an opportunity to make your money work harder, invest over a period of time and see both residual income and a final payout. And with an interest rate of up to 11% your investments can easily rise above inflation.
Being socially responsible is something that we pride ourselves on, being able to provide not only a profitable investment but one that is supporting a socially responsible cause.
Through displaying fund purity, transparency, community involvement, working closely alongside NHS & key workers we are able to provide socially responsible investments that satisfy both your bank account and your morals.
Here at Buy2LetCars we pride ourselves on being 100% transparent with our customers. When it comes to investing it’s integral that our customers know exactly what they’re doing, to help them make an informed decision.
We make it so our customers understand the process from day one, so they know how much they want to invest and how much they will earn in return. And through providing a simple but effective investment we’re proud to announce we have a zero funder default, never missing a single payment.
Many of our investors have realised that B2LC is one of the best ways to invest to create a hedge against inflation, and generate high returns. So, whether you’re looking to add to your pension, put down a deposit for a house or just put money aside for a rainy day – it all starts with investing.
Our investments begin at £7,000 and work all the way up to £100,000 plus. Of course, you’re free to invest whatever amount works for you. Whether you’re investing £10K, £30K or even £50K we provide you with interest from 7-11% IRR.
Using our returns calculator, you can work out exactly how much you can stretch your money.
Buy2LetCars offers investments that are sure to appease any uncertainty and doubt. Our investments are tried and tested and backed up by all our satisfied customers. Why not see if our inflation proof investments are right for you?
If you are interested in our investment opportunities, contact our team today on 0203 823 1032, or get in touch using our enquiries form. If you prefer a face to face chat, come and meet us at our walk-in centre, found at 1 Bell Parade, Glebe Way, West Wickham, BR4 0RH.
We offer a no-obligation online presentation delivered by one of our experienced Consultants at any time convenient to yourself. Just click the button below to book your appointment.