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Keith Brooks : Surging inflation is major contributor to uncertainty in the investment world

It is fair to say that for many people around the country the subject of investment is probably not their highest priority at the moment given the cost-of-living-crisis and, whatever your current financial situation, it is having an impact on pretty much everyone to one degree or another.

Whether it is an increase in the price of

food, energy or at the petrol pump there is understandably concern amongst both the

public and the government – mainly, how can

we manage on a day-to-day, week-to-week or month-to-month basis?

However, this rise in prices, or inflation, is also one of the biggest areas of unease for those who do have the means to invest and, whether we realise it or not, a significant number of us are investors, even if it is just through our workplace pension scheme.

Beyond established pension schemes, there

are a range of individuals who choose to invest in other ways – they may be retired, high earners with substantial disposable income, the

self-employed or they just might be the beneficiary of an inheritance.

For some, investing is a hobby or even a job, but in many cases we are not talking about the super-rich, and the returns are actually a main source of income or a way to provide for a rainy day or retirement.

Whatever their circumstances, inflation, the measure of how much prices have gone up over time and how quickly cash loses its value, is

a serious matter. In short, £1 today will get you further than £1 in 10 years’ time.

The consumer price index, including

owner- occupiers housing costs, arguably the most comprehensive measure of inflation,

rose by 6.2 per cent in the year to March 2022.

To state the obvious, this is not ideal.

For investors it means trying to find alternatives that will help insulate them from

this deterioration in value, and what with the conflict in Ukraine and wider global issues, stock markets have endured a volatile few months.

It also goes without saying that, generally, holding cash will not help outpace inflation, particularly with interest rates remaining anchored at extremely low levels.

So, what to do if you have a portfolio or are looking to take your first steps?

Well, it is often said that investing is not an exact science, and even the most experienced investor can lose money as well as make it.

There are also a vast number of investment products and options on the market and keeping up to speed with market movements and trends can be almost impossible, even for the most experienced investor.

Broadly speaking, deciding how, when and where to invest will very much depend on a number of factors, not least the tax implications, your attitude to risk, your income and your aspirations.

Designing an investment portfolio requires careful planning, and managing the potential downside of any investment is as important as targeting the potential gains and generally speaking, the higher the returns, the higher

the risk.

When planning ahead it is important to think about your short, medium and longer term needs as well as taking into consideration any possible life changes.

Any investment decisions should take account of all of these, as well as ensuring you have the opportunity to check your investment portfolio on a regular basis.

Any financial plan could include a combination of saving into a deposit account,

to putting money into an individual savings account (ISA), and investing in stocks and shares using various investment products.

Some investments, such as gold, commodities and property are also considered a better hedge against inflation, but, ultimately, a well-diversified portfolio should help iron out some of the volatility in the markets.

Other tips to reduce volatility could be to invest regularly instead of as a one-off lump sum, known as pound cost averaging. Recent performance has shown that markets will often have good months and bad months. By investing your cash over several months, you reduce the risk of being disproportionately affected by

the latter.

There are no right or wrong decisions when

it comes to investing, only decisions that meet your specific needs.

And for those who don’t do it for a job, independent financial advice should be your

first stop.

Keith Brooks is chartered financial planner at Aberdein Considine.



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