Inflation beating investment options

There is an age old proverb that advises us not to put all of our eggs in one basket, and the current inflation rate is our egg-stealing predator. Our predator shows no signs of leaving the nest or diminishing in size so it is time for a rescue operation.

As we have come to understand, stashing our eggs in a normal savings account at any conventional high street banking or financial institution will yield little to no reward, if not damage our long term plans of a secure future and comfortable old age. We need to begin to look at other options. How can we beat this Goliath of a problem?  We need clever solutions and we need them quickly.

Over the past two years, contrary to the forecasts of The Bank of England, the rate of inflation has not dropped to the estimated levels and the interest rate is still stuck in the same place. At 0.5% interest, there really is no point in stashing your eggs in any kind of conventional nest. It is time to look at new and interesting ways to hatch those precious eggs.

To start we could tie up our money in a five year cash account with a 4.8% interest rate. The only way to get a good return from this kind of investment, however, is if we have no income and thus pay no tax. We would have to just let our money sit there and wait until the time is up and we can cash it in. This is called a Cash Investment, and the Government National Savings Organisation only has three providers that offer these accounts. A tax payer might as well not bother as tax will take returns back below the inflation rate.

The next thing we could do is buy government issued bonds called Index-Linked gifts, which are basically IOU’s. Back in 2011 this was a great nest for your egg, as the return could soar to 10%, but before we get all excited there is a slight risk involved. That was then, and this is now. We would be purchasing them at premium price and their value could fall.

We could stay with the government and buy something called Conventional Gifts with returns of a approximately 2% but a possibility of falling. A lot of interest has been shown in this option because of its safety but this has only resulted in pushing up the price of investing in them. As far as landing our eggs here, it’s not the most ideal option, unless interest rates remain steady, which is a risky variable.

Now let’s take our eggs and move out of the government sector. It’s time to get a little more excited. Corporations or companies sell IOU’s too. This seems to be a good nest as not many companies have gone bankrupt in the past few years and we can invest in the short-term at decent interest rates. The only risk here is that if the interest does rise the value of these bonds would most likely fall, but right now with the interest rate holding steady at this all time low, it’s a pretty safe bet.

Property! Now that’s a good place for an egg. You can never loose with property. 3.5% to 4.5% yields and good chance of capital appreciation, as well as guaranteed nose to nose competition with inflation well into the future. This investment is virtually risk free.

The last place for us to consider as a new home for our eggs is in shares or equity in companies. This is pretty simple. We go out and find companies to buy shares in. We get dividends on our investments. We can invest in the short, medium or long term, and if we choose our companies carefully the risk is minimal. From the point of a happy nest, this is probably the best option.

The real intelligence here is for us to go and put our eggs in the safest places and hide them from that big old Inflation egg eater, and that may mean that we have to put them in many different nests and hope that they hatch, happy and healthy.