Investing to avoid inflation and instability

Gordon2710

Hi,

I recently finished uni and have unspent student loans which are currently being eaten by inflation in my useless student band account. I currently have around 8k I want to put in different places to ensure that eurozone and dollar crises don't cause another banking meltdown. I was planning to put 3k in gold and 1k in silver until I learnt about vat on silver, so that leaves only gold. I was considering cash ISA's but the best rate is around 3% which is behind inflation. I often get paid cash so I can't guarantee constant income into a bank account. I don't want all my money in gold because the rise isn't going to last forever and I don't want to put all my eggs in the one basket. I was looking for fairly low risk investment where I can keep my cash for 2-3 years, although I would like to at least keep up with inflation and have some of my assets fairly liquid.

Any help would be much appreciated.

gadgetmind

How about NS&I index linked bonds? They pay a bit more than RPI and the interest is tax free, however, don't put everything there as you say you want some liquidity. Choose a certain percentage to lock away and keep the rest on instant access.

edinburgher

I currently have around 8k I want to put in different places to ensure that eurozone and dollar crises don't cause another banking meltdown

I take it you mean something along the lines of 'in case the eurozone and dollar crises cause another banking meltdown?' If not, your £8k probably won't be enough to prevent this happening

Joking aside, it strikes me that you maybe don't know so much about investing. If this is the case, sticking your money in precious metals sounds very reactionary and I wouldn't call these low risk (well, definitely not silver).

2-3 years is far too short a period of time to consider investing with your money - look at the NS&I index-linked bonds.

greenbubble

invest it in yourself , you are the best hedge against inflation.

are there any private education courses that tie together your degree and future direction of employment ?

eg. completed a computer science degree , maybe look at doing a ccna course

i would never knock anyone for wanting to hold a 10% hedge in gold , but weigh this against any outstanding debt you have and any potential investment in yourself that would provide an edge over a competitor in the job market

Gordon2710

I am new to investing, so all comments are welcome. I figured that gold would be most likely to be resistant to whatever uncertainty is coming over the next few years, at least in the short term, but perhaps almost half of my money is a little much. I don't mind not having access to a fairly significant portion of the money for 1 - 2 years but i'm probably too young and poor to be looking to the distant future. I was really looking for a more reliable store of value compared with banks. NS&I index linked bonds sound like a reasonable alternative but I am a bit dubious of trying to exchange one government backed piece of paper (cash) for another (bonds). (I don't have too much confidence in the government.) I'm also a bit dubious of buying back what's essentially public debt in order to avoid personal debt, (but perhaps thats being overly ideological)

Any thoughts?

gadgetmind

Gordon2710 wrote: »

Any thoughts?

Yes.

There is no such thing as zero risk. You have to accept some risk in life and have to be able to weigh "risk versus reward" when making a decision.

If NS&I bonds or UK gilts are at risk of default then it means the whole system has collapsed, in which case your next meal is your biggest concern.

Maybe invest your money in MREs. Hint: these aren't an investment vehicle, but wikipedia does have an "MRE" page. :-)

Gordon2710

I do understand risk vs reward, but i'm not looking to make big profits off my small savings. (It would probably take me forever to make any serious amount of money off £8k.) I'm really looking for a better alternative to the bank to try to prevent my cash from dwindling because of global financial factors. Based on peoples suggestions I might be inclined to put £2k in gold, £2k in bonds, £2k in an ISA and keep £2k for easy access in a current account. Stocks and shares are probably out of the question with my lack of experience and available time to pour over prices and graphs. The suggestion to invest in myself does sound appealing but I don't think I'm capable of dealing with any more education. 18 years worth was more than enough!

xrjtg

You may get less than inflation on savings accounts, but you pay even less in interest on your student loan. So sticking with deposit accounts is still a safe option.

Gordon2710 wrote: »

and keep £2k for easy access in a current account

There's no reason that your instant access savings shouldn't be in a savings account too!

gadgetmind

Gordon2710 wrote: »

£2k in gold, £2k in bonds, £2k in an ISA and keep £2k for easy access in a current account.

Easy access, yes. ISA, why? The NS&I index linked can beat cash ISAs. Bonds? As interest rates rise, so will bond yields, which means that bond values fall. Google "bond yield curves".

Savings are fairly easy, whereas investments take some knowledge and a lot of patience.

BTW, all my gold holdings are via ITs such as Personal Assets, RIT and Ruffer as they understand asset allocation far better than I do.

Loughton_Monkey

Gordon2710 wrote: »

I am new to investing, so all comments are welcome. I figured that gold would be most likely to be resistant to whatever uncertainty is coming over the next few years......

Phew!

That's not the way I would put it! Gold is certainly a commodity that tends to rise when uncertainty is rising. And so if you strongly believe that the world will become more, and more uncertain, then 'go for it'.

But if you believe that we are three years into quite a big crash and a very slow recovery, and that the 'uncertainty' is being dealt with, then surely this is a very dangerous investment.

What you also have to consider (in the case of Gold) is that if/when it starts to crash, then who might be in a position to 'cash in' quickly to bank their profits, avoid the worst of the crash, and (by doing so) cause it to crash even more?

Is it the billionaires in the City with electronic instant gold trading facilities (including derivatives). Or is it little Johnny Investor proudly sitting at home polishing his gold coins?

The Gold market is a fast moving 'game' controlled by extremely rich people close to the action. Small investors are able to pick up a few crumbs on the back of a rising market, but will bear the brunt of the breadknife when it crashes.

gadgetmind

Loughton_Monkey wrote: »

that the 'uncertainty' is being dealt with

It isn't: governments are just borrowing more to cover their debt repayments. The chances of this ending in a tidy way are very slim IMO.