In broad terms, inflation defines the price of goods increasing over a period of time- and of recent, these increases can be significant. One way of hedging against these increases are by investing in alternative investments, which provides the opportunity for investors to stay ahead of the curve.
Since the prices of goods such as food and fossil fuels has increased drastically, the value of your cash has decreased- meaning you get less for what you spend. Investing into alternative investments is a great way to combat these increases, and these opportunities increase your capital gain enough for the rises to be offset by your newly acquired assets.
For example, having a diverse portfolio of investments in the property market is a great way to hedge against inflation and save you from losing out on the value of your cash year to year.
This is especially true as of late as the cost of living has consistently risen, contributing to a harsh inflation- this has caused investors to search for opportunities that have the ability to provide a growth in their capital.
During the last 12 months, the Consumer Price Index (CPI) rose by 9.9% up until August 2022, and another 0.5% has happened during the month of August. When compared to the increase in property over the year to 2022, which equates to 13.1%, the cost-of-living crisis doesn’t seem as terrifying.
Head of iSHares EMEA Investment and Product Strategy, Brett Pybus, has commented on how property “can act as a hedge against unanticipated inflation with the added option of diversification versus major equity indices…”
Major players are expecting a further increase of 4% in the property sector throughout the year up until the end of 2022, where they can then better predict the increases that will happen throughout the next year.
Property has no signs of slowing down and when compared to the sharp decline of other alternative investments such as crypto, which has dropped more than 58% since November 2021, it showcases itself as a stable, attractive investment.
It is important to choose the right investment as property has consistently conveyed how stable and reliable it can be throughout harsh times.
It is important to realise that due diligence can play a major factor in the success of your alternative property investment. Choosing the right area may provide yields that sit higher than others in similar areas. Aspects that can factor in gaining better yields can be as such: affordability, demand, the education district, regeneration areas.