Source: Bloomberg, Netwealth Investments' Calculations
Return series are calculated as the total return on the UK 1m LIBOR Cash Index, deflated by RPI, for UK Cash. The Netwealth Risk Level 4 return series is the simulated historical performance of the current strategic allocation, net of management fees and underlying fund costs, deflated by RPI. Past performance is no guarantee of future performance.
Since the end of 1984 global equities have returned in excess of 8% annually3. And while the level of future returns is not guaranteed, it is clear that by taking some risk – aiming to capture some of the long-term growth of equities – gives you a much better chance of protecting against the effects of inflation compared to cash.
How you can counteract reckless caution and combat inflation now
Of course, not everyone is comfortable taking risk, even if they intuitively know it is the right thing to do to protect their money over the long term. This is why using professionals to invest on your behalf can help you get started with more confidence.
"We give investors a choice of seven diversified portfolios with different risk levels," says Iain Barnes, Netwealth’s head of portfolio management. "This means that investors can choose from very low risk, which invests mainly in high quality, often short-dated bond funds, to a portfolio that is concentrated in growth assets like equities – with various mixes of investments, and therefore levels of risk, in portfolios between these two poles."
Because you can tailor risk levels to suit your preferences, choosing to invest, therefore, is not a binary choice of yes or no. To avoid the depletion of your funds due to inflation, a low-cost, diversified portfolio managed for you could be an ideal option for your long-term investing needs.
Please remember that when investing your capital is at risk.
1 HMRC ISA statistics https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/737394/Full_Statistics_Release_August_2018.pdf
2 Moneyfacts January 2019 ISA figures https://moneyfacts.co.uk/news/savings/average-one-year-isa-rate-increases-to-three-year-high/
3 MSCI World Total Return denominated in GBP, for the period 31-Dec-1984 to 31-Dec-2018.