A Barclaycard survey back in October 2021, found that 88% of UK consumers were worried about rising inflation. Since then, the Consumer Price Index (CPI) has continued to rise.
In April 2022, the Office for National Statistics (ONS) confirmed that inflation for March had reached 7%. This marks the fastest rise in three decades. The Bank of England (BoE), meanwhile, confirms that the CPI might not return to its 2% target until 2024.
While the rising cost of living is set to affect all of us over the next couple of years, a recent report from MarketWatch confirms that it could be especially detrimental to women’s finances.
This is largely due to the gender investment gap. But what is that? And why is rising inflation set to make the problem worse?
Keep reading to find out.
The risk of not taking enough risk
If you have cash held with a high street bank, you will already be aware of current savings rates. Having dropped following the 2008 global financial crisis, they reached historic lows at the outbreak of the coronavirus pandemic.
Even a third consecutive base rate rise by the BoE (to 0.75%) offers little respite for savers. And the impact of low rates on your savings is clear, especially during periods of high inflation.
Simply put, when the interest you earn is less than the rising cost of living, your money is effectively losing value in real terms.
Be sure to keep an emergency fund – of between three to six months of household expenditure – in an easy-access cash account. But don’t hold more than you need.
You might consider adding to your investment portfolio, or investing for the first time, with excess funds you hold. There are risks inherent in investing – the value of your fund can fall as well as rise – but the added risk could come with rewards too.
Reports find that women tend to be more risk-averse
At Globe IFA, we can help you to manage your investments, giving you the best chance of meeting your investment goals while taking the lowest possible amount of risk.
While women have tended to be seen as more cautious investors, the MarketWatch report did confirm an increase in engagement. Two-thirds (67%) of women surveyed stated that they had investments beyond their retirement fund, while 52% are planning to create a long-term financial plan.
The survey did, though, find that a gender investment gap still exists.
While the average Stocks and Shares ISA returned 6.9% in 2021/22, Cash ISAs returned only 0.51% on average. Yet almost a third of women prefer cash accounts, compared with 23% of men.
And, while 42% of men admitted to seeing themselves as investors, only 33% of women are confident in their ability to make investment decisions.
3 key investment points to consider
Investment should only be entered into with a long-term goal in mind, with a full understanding of your risk profile and capacity for loss. Here are three key points to remember.
1. Know what your long-term investment goal is
You should only invest with a long-term goal in mind, ideally one that is at least five or 10 years away or more.
This allows time for inevitable short-term market blips to even out and gives you the best chance of achieving your goal.
2. Your attitude to risk and your capacity for loss aren’t the same thing
You might be risk-averse but have a higher capacity for loss. This might mean you can afford to take greater risk. Conversely, the opposite might be true.
Attitudes to money can be formed at a young age and will change depending on your goals and timescales. You might be willing to take more risk on your own retirement than on money put aside for your child’s education, for example.
Your capacity for loss on the other hand is a definite calculation based on your current and future finances. And it’s a calculation that we can help with.
3. The importance of staying calm and avoiding knee-jerk reactions
Global events including the Brexit referendum, the coronavirus pandemic, and Russia’s invasion of Ukraine can affect the stock market.
The periods of short-term volatility caused by these events are the reason we recommend investing only for the long term. They are an anticipated part of your investment plan. The key is to remain patient, calm, and focused on your long-term goal.
Staying invested, remaining unemotional, and avoiding knee-jerk reactions give you the best chance of seeing gains when the market recovers.
Remember to avoid trends. Investment isn’t a race to see who can gain the most money, it’s an individual journey to your goal, based on your risk profile. We can help you reach your goal while taking the lowest possible amount of risk.
Get in touch
If you have reservations about investing for the first time, remember that we are here to help and that we have decades of experience dealing in the markets. We can help you to understand the balance of risk versus reward and help you to achieve your investment goals.
Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you.
Please note
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
