5 tips on how to beat inflation

Nick Hungerford


4 min read

As the rate of inflation falls within the Government’s 2% target for the first time in four years, the key questions remain: How does this actually impact consumers’ spending power, and what does it mean for those looking to make the most of their savings and investments?

How to beat inflation

The latest figures from the Office for National Statistics (ONS) show a small improvement downwards in the rate of inflation but there is still a long way to go before consumers feel any benefit. The key thing to remember is that wages have stagnated, so UK household incomes in real terms are still losing ground, even on an inflation rate of 2%.

The good news is that we’re most definitely on the road to economic recovery. The bad news is that it’ll be some time until British households reap the rewards of that recovery. This is particularly true for cash savers, who are also faced with the prospect of low interest rates throughout 2014.

Since 2009, those with savings and investments have been battling to get returns on their money that are good enough to rival the eroding effect of inflation. Average fixed interest rates on long-term savings accounts hit an all-time low of 2.4% in November. It’s been difficult for savers to find a high street bank that will beat inflation for a good few years now, so investing in the stock market can look a better proposition for many.

Inflation top tips

The land of investment opportunities

If you’re looking to the investment landscape for higher gains, it’s important to look at the full breadth of opportunities out there – for example, stocks and shares, bonds and commodities, across all types of industries and countries. At Nutmeg we create portfolios from a range of investment assets, geographies and sectors in order to spread risk and also to give our customers’ investments the opportunity to benefit from gains in a number of areas.

It’s also important to align your investments to your financial goals and, particularly, your appetite for risk. In 2013 you could get returns from traditionally low-risk investments that considerably outperformed cash. Our low-risk portfolio (which we benchmark as holding 20% in equities and 80% in bonds) delivered returns of 7.8% last year, after fees. Our medium-risk portfolio (60% equities, 40% bonds) fared even better, up 14.5%, while our high-risk portfolio (100% equities) returned 20.6%.

Nutmeg portfolio performance

Click the image above to view Nutmeg’s performance figures across all portfolios.
[Past performance is simulated, based on real market transactions implemented across all individual customer portfolios to a single portfolio for each risk level. Past performance is not a reliable indicator of future performance.]

Taking control

It is essential investors look for ways to protect their investments in times of high inflation but, unfortunately, many just don’t know what to do. We conducted a survey of 1000 investors with Opinion, which revealed that less than a quarter (23%) say they will actually review their portfolio to assess the positive changes they can make each year, while one in six (16%) admit they don’t know what to do in order to protect their returns.

For anyone looking to beat inflation, here are our five top tips.

1. Know your numbers. Keep track of the monthly inflation figures, so you know what you need to beat in order to see your money maintain its value and, hopefully, grow.

2. Shop around. If you’re more comfortable with a fixed-rate savings account than an investment portfolio, don’t settle for the first one you see, or go with a big brand name just for the sake of it. Do your research to find the best deal for you.

3. Remember, investing isn’t just for the super-rich. These days, you can start a portfolio with just a few thousand pounds and by adding small monthly contributions you’ll soon see your investment pot grow. Again, explore all investment opportunities out there to see what’s most appropriate for you.

4. Think long-term. If you’re new to investing, it could be foolish to try to beat the stock market through day trading. You might end up in a real mess. Look at your financial objectives, set an investment plan with a timeframe of at least five years and stick to it, and remember to review your investments as your life circumstances change.

5. Increase your income. You can of course improve your spending power in times of high inflation by increasing your household income. It’s easier said than done, but it’s a good time to benchmark your salary against industry averages, know how to negotiate a rise and consider sources of a secondary income.

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New to Nutmeg?

If you are looking to invest but are not sure where to start, Nutmeg can help. We build an investment portfolio for you based on financial information you provide and your personal attitude to risk. And our online tools are data driven, giving you a clear idea of risk and return. We’re low cost and transparent so you can always see where your money has been allocated and how it’s performing.

Try it out, with no obligation – you can set up a portfolio in just a few minutes

Why Nutmeg? 

Because we’re the way investing should be – intelligent, transparent and low cost. See how we compare

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Risk warning

The views and opinions expressed here are for informational purposes only. They are subject to change without notice, and do not take into account the specific investment objectives, financial situation or individual needs of any particular person. They are not personal recommendations and should not be regarded as solicitations or offers to buy or sell any of the securities or instruments mentioned. The views are based on public information that Nutmeg considers reliable but does not represent that the information contained herein is accurate or complete.

With investment comes risk. The price and value of investments mentioned and income arising from them may fluctuate and you may get back less than you invest. A movement in exchange rates may have a separate effect, unfavourable as well as favourable, on the gain or loss otherwise experienced on the investment concerned.  Past performance is not an indicator of future results, and future returns are not guaranteed.   We acknowledge an individual’s tax situation is unique and tax legislation may be subject to change in the future.

Past performance is simulated, based on real market transactions implemented across all individual customer portfolios to a single portfolio for each risk level. Past performance is not a reliable indicator of future performance

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Nick Hungerford

Nick is one of Nutmeg’s co-founders, and is now a non-executive director on our board. He holds an MBA from Stanford University. His industry and investment views are respected globally and he frequently appears on television and in the national media. Nick can be found tweeting @NickHungerford.


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