Rising Interest Rates Spark Stock Market Boom as Savers Struggle to Keep Up With Inflation
The global economy is on the upswing, with most central banks hiking interest rates in an attempt to tackle inflation. Inflation is much higher than the savings rate at the moment, meaning savers are losing money to inflation every day. Investors are forced to take risks just to keep up with inflation.
Can I make money keeping my cash in the bank?
The short answer is no, you cannot make money by keeping your cash in the bank. If you account for inflation, you are currently losing money every day that your money is sitting in the bank. Interest rates on savings accounts are very low and are not even close to keeping up with the rate of inflation. It may take years for interest rates to fall in line with inflation again, therefore it’s important to consider other options to have the possibility to keep up with inflation, rather than lose to it.
What asset class is most likely to succeed in a high-inflation scenario, and how can you decide?
Bonds have always been seen as a safe investment, but in a high inflation environment, they can lose you money just like cash. This is because when inflation rises, the interest payments on bonds do not increase at the same rate. As a result, the real value of your investment will go down over time as inflation eats away at the purchasing power of your money.
So, if bonds and cash are not the best investment during periods of high inflation, what is? The answer may surprise you – it is actually stocks. Stocks have traditionally been a good investment in a high inflation environment. When the prices of goods and services are rising, so too are the prices of stocks. This is because businesses have to increase prices and will make more money as people spend more, and their share prices will increase as a result. This makes stocks a good way to protect your money against inflation, and potentially make a profit at the same time.
How can I begin to safeguard my savings from inflation today?
There are several ways to invest, but the most common is through a financial adviser. At SJB, we can help you make the right decisions about where to invest your money, and how much risk you are willing to take. We will also be able to provide you with information about different tax-efficient investment products that may be suitable for your country of residence and provide you with an investment strategy to help you achieve your financial goals. Enquire through our website today to receive a 15-minute free consultation to find out if our service is the right fit for you. Act now before inflation further eats away at your hard-earned savings.
This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
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