Rising inflation – have you taken the time to review your investments?

UK inflation has risen to 9% – the highest rate in 40 years, with the Bank of England predicting a rise to 10% over the coming months. The increasing costs of fuel, household bills and food prices are affecting us all, but what does this mean for your investments?

In our latest blog, we highlight how your investments may be affected by inflation, and why now may be a better time than ever to undertake a full review.

Inflation on the rise

Inflation is rapidly increasing in the UK – we are seeing the fastest rise for 30 years. There are a variety of external factors contributing to these surges in prices:

  • Rising fuel, energy and food costs
  • The Russia-Ukraine conflict
  • Post-Brexit import changes

How can inflation impact your investments?

The effect of inflation varies for different types of investments.

Cash

This includes keeping cash in the bank or on hand.

  • Cash isn’t a ‘secure’ investment in times of high inflation as it can lose its value in the face of rising prices – this can result in a loss of purchasing power on any cash you have saved.
  • Although the Bank of England announced an increase to the base rate in May 2022 (from 0.75% to 1%) this isn’t enough to balance out inflation (predicted to hit 8% in the coming months.

Bonds

A bond is a loan given to a company or government that is paid back with interest. Similar to cash, bonds tend to lose value when inflation is high

  • The value of a bond fluctuates based on the desirability of the interest rate you are receiving. High inflation can make bonds a less desirable investment, meaning they may drop in value. Consequently, if you have invested in a fund containing bonds, the value may fluctuate due to inflation

Stock and shares

  • Inflation typically has less of an effect on stocks and shares
  • To keep up with inflation, some companies may increase their prices (theoretically, their profits will be maintained or can grow with inflation)
  • Keep in mind that past performance is not a reliable indicator of future results

How can we help?

PM+M’s Managed Portfolio Service (MPS), is a bespoke investment portfolio produced by us, and managed in collaboration with AJ Bell, to make your life easier.

Working together, we continually monitor the market, conduct ongoing due diligence in relation to the funds held within the Managed Portfolio Service portfolio.   We proactively make fund and asset allocation changes when we feel as though this is necessary in order to manage volatility and drive long term growth. Our Managed Portfolio Service aims to provide you with the best combination of investments to maximise your potential returns with a level of risk that suits you.  Furthermore, you will not have to sign paperwork each time we recommend changes; we would simply implement them for you.

Get in touch

If you would like to discuss your investments in more detail, or need some tailored advice specific to your situation, including more information on our Managed Portfolio Service, get in touch by emailing financialplanning@pmm.co.uk, or by calling 01254 679131.

The value of investments can go down as well as up and may be worth less than was paid in.

The information here is based on our knowledge of the markets in April 2022 and shouldn’t be taken as financial advice.

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