With inflation reaching record highs, investors in gold, UK equity, global equities and residential property will have found they have managed to beat CPI during the first quarter, according to research.
The latest quarterly returns-after-CPI inflation tracker via Interactive Investor found that while interest rates on cash savings were rising, the average one-year fixed rate paying 1.06 per cent will have delivered a negative real return of -5.94 per cent.
However, during the first quarter of 2022, gold has boomed in value, with an actual annual return of 19.63 per cent at the end of March, resulting in a real return of 12.63 per cent.
The cost-of-living crisis has brought focus to the impact inflation has on energy, food and transport bills. This has also created a knock-on effect on the real returns of investments.
The Consumer Price Index measure of inflation continues to rise with expectations of 10 per cent on the near-term horizon, while the Bank of England's monetary policy committee has been slowly raising interest rates, with the latest rise taking the base rate to 1 per cent.
Becky O’Connor, head of pensions and savings at interactive investor, said: “It is hard to beat the rising cost of living by reducing spending, but it’s also hard to beat the risk from inflation of real losses when saving and investing, for those looking to preserve the value of their money."
The worst performers were global corporate bonds, being at negative returns prior to inflation at -1.69 per cent and -8.69 per cent, in the year to March 2022.
In the year to the end of March, Isa accounts belonging to interactive investor, was on average, up by 5.8 per cent, yet in real terms this would equate to return -1.2 per cent.
The average Sipp account was up 4.8 per cent but down -2.2 per cent after inflation was factored in, over the same period.
Average annual actual and real returns over 12 months to March 2022, based on 7% CPI annual inflation to end of March:
| Asset/product type | Annual return, end of March 2022 | Annual return to end of Dec 2021 | Real annual return after UK CPI inflation, to March 2022 | Real annual return to end of Dec 2021 |
|---|---|---|---|---|
| Average easy access cash savings account (interest) | 0.33% | 0.17% | -6.67% | -5.23% |
| Average 1-yr fixed rate bond (interest) | 1.06% | 0.59% | -5.94% | -4.81% |
| Global equities (MCSI World Index) | 15.39% | 22.9% | 8.39% | 17.5% |
| UK equities (FTSE All Share) | 13.03% | 18.32% | 6.03% | 12.92% |
| Residential property - capital growth | 14.3% | 10.4% | 7.3% | 5% |
| Residential property - rental yield, gross (to Feb 2022) | 4.93% | 4.98% | -2.07% | -0.42% |
| Gold | 19.63% | -2.87% | 12.63% | -8.27% |
| Global corporate bonds | -1.69% | -2.06% | -8.69% | -7.46% |
| interactive investor Isa investor performance - average (capital growth and income) | 5.8% | 13.7% | -1.2% | 8.3% |
| interactive investor Sipp investor performance - average (capital growth and income) | 4.8% | 12.2% | -2.2% | 6.8% |
Source: Interactive Investor research, April 2022.
O’Connor also added: “Returns from gold, global equities, UK equities and residential property on average beat inflation in the year to March 2022, but don’t expect this to always be the case. Past performance is never a guide to the future.
"Even gold, which is famed for its inflation-busting properties, can be flighty, and sensitive to all kinds of things, not least the strength of sterling and the US dollar.
“Despite continuing to grow above inflation, global equities and UK equities also experienced the biggest drop of all the asset classes we compared in annual real returns, compared with the previous quarter ending December 2021.
“Choosing investments is rapidly becoming an art in deciding where real returns will be least bad, at least for as long as rampaging inflation is expected to last."
