Inflation is rising: where should you put your money?

However, Michelle McGrade of TD Direct warned that the UK index-linked market “has performed strongly of late and may start to look expensive if interest rates rise”.

UK government bonds, or “gilts”, managed to deliver higher returns than inflation 75pc of the time, although inflation has been low over the period and bonds normally suffer in inflationary times.

Infrastructure and commodities have performed less well, beating inflation only 53pc and 55pc of the time respectively.

However, Ms McGrade said investors should ensure they stuck to the basic principle of having a well-balanced diversified portfolio, including some investments that did not cope well with inflation.

“It is not only important to consider whether a particular asset class is inflation-proof, but also the correlation of asset classes to each other,” she said. “Accessing a number of different sources of inflation protection that are not highly correlated to each other will be beneficial for your portfolio.

“As ever, it is essential for long-term investors to have a balanced, well diversified portfolio, whatever the economic backdrop.”


Originally published at www.telegraph.co.uk.

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