Rampant inflation, what do i do?

Aretnap

WelshGlyndwr said:

Aretnap said:

If you have a fixed rate mortgage that is three times your savings then you should certainly cross your fingers and hope for rampant inflation. However I suspect that you'll be disappointed. Certainly 30 year bond yields of ~0.6% don't suggest that mainstream professional investors and economists are expecting inflation to return to the levels of the 1970s, or even the early the 1990s, any time in the foreseeable future. The people I see predicting imminent rampant inflation are mainly people trying to sell me gold, people trying to sell me Bitcoin, and people who have been predicting that quantitative easing will lead to imminent hyperinflation since at least 2008.

That said there is little point in keeping about two years of take home pay in cash unless you have a plan for spending it in the next few years; cash savings will usually be gradually eroded by inflation over the years, and you are missing out on the better expected long term returns that come from stocks and shares. So you should consider keeping enough cash as a buffer for emergencies (eg unemployment, major car repairs, new boiler), and putting the rest into a broad based stocks and shares fund for long term investment.

Unfortunately there is no way of protecting savings from inflation without taking some risk of loss, at least in the short to medium term.

thanks, but not many stocks shares isas make a return, most of them are a loss. Perhaps safer in a savings account

This is... just not true. To give a popular, representative example of a fund which invests in a broad, global range of shares and bonds, the Vanguard Lifestrategy 60 fund has given a total gain of 58% over the last 5 years (less a couple of percent in total for platform fees, depending on which platform you use), and a positive return in every one of those years. Obviously there have been short term ups and downs along the way, but the trend is clear even over the medium term.

Numbers here

There are numerous other broad based funds which can be held in an ISA; the exact numbers will be different but the general picture will be much the same. You will have to look very hard indeed to find a broad, global stocks and shares fund which has lost money over the last 5 years or so.

You might find some specialist funds which invest in a narrow type of company which have lost money, and certainly if you invest in shares in individual companies based on tips in newspapers of internet forums then your chances of losing money are much higher - but very few people on these boards would recommend that type of investing.

jimjames

WelshGlyndwr said:

inflation may become rampant soon. How do i shield my savings against it?

At your age I would certainly be looking at investments rather than holding all cash. You don't mention if you already have investments but that sounds a lot of cash to hold with no set date for requiring it.
Investments should hold value against inflation unlike cash but there are obviously more risks that just holding cash

WelshGlyndwr

jimjames said:

WelshGlyndwr said:

inflation may become rampant soon. How do i shield my savings against it?

At your age I would certainly be looking at investments rather than holding all cash. You don't mention if you already have investments but that sounds a lot of cash to hold with no set date for requiring it.
Investments should hold value against inflation unlike cash but there are obviously more risks that just holding cash

I hold it all as cash. Investments are sonething ive never considered at it sounds scary. I guess investing in stocks and shares isas may be way to go. Its just a minefield.

WelshGlyndwr

Aretnap said:

WelshGlyndwr said:

Aretnap said:

If you have a fixed rate mortgage that is three times your savings then you should certainly cross your fingers and hope for rampant inflation. However I suspect that you'll be disappointed. Certainly 30 year bond yields of ~0.6% don't suggest that mainstream professional investors and economists are expecting inflation to return to the levels of the 1970s, or even the early the 1990s, any time in the foreseeable future. The people I see predicting imminent rampant inflation are mainly people trying to sell me gold, people trying to sell me Bitcoin, and people who have been predicting that quantitative easing will lead to imminent hyperinflation since at least 2008.

That said there is little point in keeping about two years of take home pay in cash unless you have a plan for spending it in the next few years; cash savings will usually be gradually eroded by inflation over the years, and you are missing out on the better expected long term returns that come from stocks and shares. So you should consider keeping enough cash as a buffer for emergencies (eg unemployment, major car repairs, new boiler), and putting the rest into a broad based stocks and shares fund for long term investment.

Unfortunately there is no way of protecting savings from inflation without taking some risk of loss, at least in the short to medium term.

thanks, but not many stocks shares isas make a return, most of them are a loss. Perhaps safer in a savings account

This is... just not true. To give a popular, representative example of a fund which invests in a broad, global range of shares and bonds, the Vanguard Lifestrategy 60 fund has given a total gain of 58% over the last 5 years (less a couple of percent in total for platform fees, depending on which platform you use), and a positive return in every one of those years. Obviously there have been short term ups and downs along the way, but the trend is clear even over the medium term.

Numbers here

There are numerous other broad based funds which can be held in an ISA; the exact numbers will be different but the general picture will be much the same. You will have to look very hard indeed to find a broad, global stocks and shares fund which has lost money over the last 5 years or so.

You might find some specialist funds which invest in a narrow type of company which have lost money, and certainly if you invest in shares in individual companies based on tips in newspapers of internet forums then your chances of losing money are much higher - but very few people on these boards would recommend that type of investing.

so if its your first time investing. How much would you start with like 5k?

Thrugelmir

WelshGlyndwr said:

inflation may become rampant soon. How do i shield my savings against it?

Care to share a source? You do realise that it's the BO's remit to monitor inflation. At your age you have no idea what rampant inflation is!  Recall one year receiving a 21% pay rise when inflation was around 18%. 

masonic

WelshGlyndwr said:

Aretnap said:

WelshGlyndwr said:

Aretnap said:

If you have a fixed rate mortgage that is three times your savings then you should certainly cross your fingers and hope for rampant inflation. However I suspect that you'll be disappointed. Certainly 30 year bond yields of ~0.6% don't suggest that mainstream professional investors and economists are expecting inflation to return to the levels of the 1970s, or even the early the 1990s, any time in the foreseeable future. The people I see predicting imminent rampant inflation are mainly people trying to sell me gold, people trying to sell me Bitcoin, and people who have been predicting that quantitative easing will lead to imminent hyperinflation since at least 2008.

That said there is little point in keeping about two years of take home pay in cash unless you have a plan for spending it in the next few years; cash savings will usually be gradually eroded by inflation over the years, and you are missing out on the better expected long term returns that come from stocks and shares. So you should consider keeping enough cash as a buffer for emergencies (eg unemployment, major car repairs, new boiler), and putting the rest into a broad based stocks and shares fund for long term investment.

Unfortunately there is no way of protecting savings from inflation without taking some risk of loss, at least in the short to medium term.

thanks, but not many stocks shares isas make a return, most of them are a loss. Perhaps safer in a savings account

This is... just not true. To give a popular, representative example of a fund which invests in a broad, global range of shares and bonds, the Vanguard Lifestrategy 60 fund has given a total gain of 58% over the last 5 years (less a couple of percent in total for platform fees, depending on which platform you use), and a positive return in every one of those years. Obviously there have been short term ups and downs along the way, but the trend is clear even over the medium term.

Numbers here

There are numerous other broad based funds which can be held in an ISA; the exact numbers will be different but the general picture will be much the same. You will have to look very hard indeed to find a broad, global stocks and shares fund which has lost money over the last 5 years or so.

You might find some specialist funds which invest in a narrow type of company which have lost money, and certainly if you invest in shares in individual companies based on tips in newspapers of internet forums then your chances of losing money are much higher - but very few people on these boards would recommend that type of investing.

so if its your first time investing. How much would you start with like 5k?

How much money would you need to cover 3-6 months living expenses and any short term spending needs you may have? The remainder could be invested. Some allocation towards cash could be considered as part of your investments, but you'll not see much benefit from holding 90% in cash.

WelshGlyndwr

masonic said:

WelshGlyndwr said:

Aretnap said:

WelshGlyndwr said:

Aretnap said:

If you have a fixed rate mortgage that is three times your savings then you should certainly cross your fingers and hope for rampant inflation. However I suspect that you'll be disappointed. Certainly 30 year bond yields of ~0.6% don't suggest that mainstream professional investors and economists are expecting inflation to return to the levels of the 1970s, or even the early the 1990s, any time in the foreseeable future. The people I see predicting imminent rampant inflation are mainly people trying to sell me gold, people trying to sell me Bitcoin, and people who have been predicting that quantitative easing will lead to imminent hyperinflation since at least 2008.

That said there is little point in keeping about two years of take home pay in cash unless you have a plan for spending it in the next few years; cash savings will usually be gradually eroded by inflation over the years, and you are missing out on the better expected long term returns that come from stocks and shares. So you should consider keeping enough cash as a buffer for emergencies (eg unemployment, major car repairs, new boiler), and putting the rest into a broad based stocks and shares fund for long term investment.

Unfortunately there is no way of protecting savings from inflation without taking some risk of loss, at least in the short to medium term.

thanks, but not many stocks shares isas make a return, most of them are a loss. Perhaps safer in a savings account

This is... just not true. To give a popular, representative example of a fund which invests in a broad, global range of shares and bonds, the Vanguard Lifestrategy 60 fund has given a total gain of 58% over the last 5 years (less a couple of percent in total for platform fees, depending on which platform you use), and a positive return in every one of those years. Obviously there have been short term ups and downs along the way, but the trend is clear even over the medium term.

Numbers here

There are numerous other broad based funds which can be held in an ISA; the exact numbers will be different but the general picture will be much the same. You will have to look very hard indeed to find a broad, global stocks and shares fund which has lost money over the last 5 years or so.

You might find some specialist funds which invest in a narrow type of company which have lost money, and certainly if you invest in shares in individual companies based on tips in newspapers of internet forums then your chances of losing money are much higher - but very few people on these boards would recommend that type of investing.

so if its your first time investing. How much would you start with like 5k?

How much money would you need to cover 3-6 months living expenses and any short term spending needs you may have? The remainder could be invested. Some allocation towards cash could be considered as part of your investments, but you'll not see much benefit from holding 90% in cash.

maybe 5k is good to start with. i guess 36k would be enough in savings.

sevenhills

WelshGlyndwr said:

so if its your first time investing. How much would you start with like 5k?

With trading costs up to £15 per transaction, I would say a minimum of £500 per share. You could buy 5 different shares and see how they perform.

Ray_Singh-Blue

Paying off the mortgage won't protect you from inflation. 

If you believe inflation is coming, it would make more sense to use that money to invest in scarce assets, which should become more valuable in money terms.

masonic

sevenhills said:

WelshGlyndwr said:

so if its your first time investing. How much would you start with like 5k?

With trading costs up to £15 per transaction, I would say a minimum of £500 per share. You could buy 5 different shares and see how they perform.

Who mentioned buying individual shares? The vast majority of people, especially those who are inexperienced and nervous, should stick to collective investment funds, which on a cost effective investment platform for the sum under consideration can be bought and sold without transaction fees.

Holding just 5 shares would be very high risk investing, of the sort that might lead someone to a very poor result as mentioned earlier in the thread.