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  • Writer's pictureMark Watson-Mitchell

Where to Invest: Top 3 Investments to Protect Yourself Against Inflation

As we’re preparing to deal with an 11.1% inflation as of October 2022, people are looking for ways to secure their money and capitalise on their assets.

Cryptocurrency, NFTs, and stocks have become popular forms of investment in recent years, but they might not be the best option during an economic downturn. People are looking for more tangible and traditional types of investment that bring them a sense of security and stability that will help them weather economic storms.

Long-term investment in physical assets is one of the best ways to protect your money during a period of inflation. Here is how to diversify your investment portfolio with the asset classes that are a proven hedge against inflation.

Old but gold

Gold is one of the oldest forms of physical investment that’s not only safe but also considered a hedge against inflation. Historically, the price of gold has increased at times when money has been devalued. It’s no surprise that during the start of the pandemic in 2020, gold price spiked exponentially and is now reaching that peak again.

But why is gold used as a hedge against inflation? Economically, as the price of consumer goods increases, the pound loses its value. Retrospectively, the price of gold denominated in pounds rises, and investors convert their cash holdings into gold as a way to protect their assets against inflation.

Alongside protecting savings, you can actually make money from gold. In 2020, out of all the major assets, gold had the highest return, about a 25% yield.

There are three ways to invest in gold: gold bullion, gold coins, and gold jewellery. When investing in gold, it’s important to stay up to date with the price of gold to understand the best time to invest or sell.

Another key element of gold investment is storing it safely. There are a few options you can go for. Storing your gold at home allows you to have your precious metal on hand and doesn’t have to carry an additional cost after purchasing the storage vessel. The best place you can keep your gold at home is in an underfloor safe, as that will keep it out of sight of potential burglars.

You can also opt for an offsite gold storage solution, such as a retail bank, bullion bank, or bullion depository. While safe deposit boxes at your local bank provide safety, they don’t offer insurance or a liability loss and give you limited access and space. Bullion bank vaults offer better security than a consumer bank and more space but are only located in major cities and usually require a minimum of 1,000 oz of gold to open a storage account.

Lastly, bullion depositories offer high-level security and unlimited space but have higher storage and withdrawal fees.

Real estate investments

Real estate is another tried-and-tested hedge against inflation. This is a large market that presents many investment opportunities, especially for those who adopt a long-term mindset towards their investments. You can invest in raw land, residential, or commercial estate.

As inflation rises, so do property values and rent prices. While immediate profitability can be impacted by rising inflation and higher property prices, the long-term return on investment is greater than the initial value. That is so because rents are also increasing and so is the value of the property over time.

With the ongoing UK housing shortage, landlords can invest in areas where the demand from tenants is high, thus capitalising on higher and consistent rents. If you are thinking of buying property, consider if the yield from the rent is higher than the original value to ensure that you’re making a profitable investment.

Investing in commodities via future contracts

Commodities are another bulletproof physical investment option that can shield your money against inflation. As with gold and real estate, commodity prices rise along with inflation. Historically, commodities have performed well during periods of high inflation.

Some of the most common commodities include raw materials, energy solutions, and agricultural products, such as oil, grain, cattle, beef, and coffee, amongst many others.

The most common way to invest in commodities is via future contracts, also known as derivatives, that allow you to buy or sell a certain amount of the commodity at some point in the future.

One thing you must take into consideration is that commodities’ value tends to fluctuate based on supply and demand. Therefore, it’s critical that you do your research, plan ahead before investing, and prepare for a long-term investment.

Investments are a great way to keep your money safe during inflation and offer the opportunity to have a satisfactory return on investment. It’s important to wisely consider your options before investing and diversify your portfolio if you can.


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