2 Investing Options to Beat Inflation
In the previous article I looked at how equities can help protect against inflation. Let’s look at some of the other options we have to protect the value of our hard-earned money.
One safe way to keep pace with inflation might be to deposit your money into a fixed deposit account. Fixed deposit returns can range from 0.05% to 1.4% (local bank rate) and if you’re lucky you might get a promotional rate which goes up to as high as 2%.
However, one must stop and wonder, if I am getting a return of 1.4%, I am still going to be on the losing end as the value of my money still drops. If I were on a promotional rate, then maybe it still makes a bit more sense because I can cover at least the value lost to inflation.
But then, there is another factor that an individual needs to remember; no one invests all their savings. For example, if an individual invests 50% of their savings, they need a return of 3.2% just to cover their loss in value.
The next option individuals have is in the form of bonds. If you are in Singapore, you have the option of investing in a Government bond which is floated every month called the Singapore Saving Bonds.
This link will bring you to the page that gives you information about the current bond offering and its interest rates. The July 2019 bond will carry an interest rate which starts at 1.93% and increases until hitting its maximum of 2.55% in year ten. Looking at the average returns, it comes in at 2.16% over the 10-year period.
Like in the above example, if an individual is only investing 50% if saving, the returns might not be enough to cover the loss in value.
While the two options discussed above are considered to be the safest options I’ve talked about, it quickly becomes clear that while these options are viable options in helping you protect your wealth they are not ideal.