The risks of inflation – how will it affect me in my pocket and my portfolio?

One of the hottest topics of late, not just in the investment world but also on mainstream news, is the ongoing rise in prices; inflation is proving less transitory than some commentators had initially thought.

Even for those of us over 50, higher inflation is little more than something we were vaguely aware of in the 70s & 80s. For those (lucky!) younger ones, inflation is something of a new phenomenon; for the first time in a long time, inflation is making investors and consumers sit up and take notice.

There are a number of reasons why it is currently proving to be more persistent; pent-up demand in the economy following Covid lockdowns, supply chain disruption, government stimulus, energy price rises and labour shortages with upward pressure on wages coming down the track. It is difficult to know when we will see an end to the current issues although the hope is that these pressures may ease sometime this year. We may be seeing interest rates rises shortly and this could have an impact on mortgage costs although the high levels of debt in the economy may mean there is a cap on these rises for borrowers. Inflation is particularly problematic for cash-based savers and those on fixed incomes or where wages don’t keep pace with the rate of inflation.

So, while we manage our bank balances to cope with the rise in the price of goods we want or need to buy, and when it comes to paying for oil, gas, petrol or food this can be especially difficult, we also need to think of the best way to mitigate inflation in our pension or savings funds. This can be done in a number of ways in relation to managing assets within portfolios and there will always be different opinions about the best way to do it. However, holding assets which provide long term real returns such as equities and bonds offers investors the best chance of keeping ahead of inflation. At Law Society NI Financial Advice we have a range of portfolios to suit all risk levels, based on our proven investment philosophy.

If you would like a chat or review of your own or a client’s investment portfolio please do not hesitate to contact us below.

Important note: investments can fall as well as rise, and past performance may not be a reliable guide to the future

Share the article