Apart from the emergency fund, how much cash should I keep as a percentage of my investments? Inflation is going to be as low as possible, but I know a lot of people who turned most of their assets into cash when stocks fell, both to mitigate losses and to be ready to buy when things got better again. What is the best cash strategy in a high inflation environment?
Paul Surguy, Managing Director, Head of Investment Management at Kingswood, Recall that former US President Ronald Reagan once said, “Inflation is as ferocious as a robber, as terrible as a robber with a gun, and as deadly as a killer.” Perhaps inflation is better described as a silent assassin: for the big For most economies, it has persisted, gradually eating away at the purchasing power of cash.
With prices rising to levels not seen since the 1970s, many are asking what they can do to protect their assets. To see the effect it can have on cash holdings, consider £1,000 in the bank today.at current (assuming consistent) levels inflation This will be worth £917.43 in one year. In the UK, supply bottlenecks and oil prices exacerbated the rise. With these easings, the hope is that inflation will naturally start to fall.
Hold cash for ultimate protection. Historically, for those with memories going back to the 1990s and early 2000s, one might expect a little interest in cash in the bank. However, even if global interest rates rise, any interest received is insignificant compared to inflation.
So where can people go to protect their assets from inflation? Traditionally, real estate and equities would be the first port of call, and within a certain risk tolerance, should still be the best place to be. Inflation-Protected Bonds are a lower risk investment protection method.
However, all of these are riskier in the short term than cash because their value fluctuates. That’s why investors should make sure they have a diversified portfolio that suits their risk tolerance. There are also broader alternatives such as gold (a traditional inflation hedge) and uncorrelated assets such as low risk, hedge fund type investments.
That being said, cash remains the ultimate safety net for investors. Three to six months of income still feels like a reasonable level of cash to sustain any short-term emergency. This can always be reassessed if inflation falls or the value of risky assets increases. We should also start to see a small increase in the interest paid by banks, as the central bank has made it clear that the direction of interest rates is upwards.
Current expectations are for UK interest rates to be just above 2% by the end of the year. In the US, the figure is closer to 3%. Of course, that’s higher than we’re used to, albeit below what history suggests as “normal”.
How to resolve vacation home disputes?
My mother passed away recently and left her estate (including a holiday home on the Sussex coast) to my brother and I. The older brother, who is the executor, doesn’t seem to be in a hurry to sell the holiday home, although he has always understood that. Can I force a sale?
Kai Jones, Senior Associate in the Private Accounts Team at RWK Goodman, Saying it’s not easy to deal with the fact that the loss of a mother and brother appears to be selling a vacation home.
I’m assuming your brother is the sole executor and your mother’s estate will be divided equally between the two of you. As the executor, your brother is responsible for collecting estate assets, paying off any outstanding debts from your mother and administrative costs, such as attorney fees. Once estate assets have been collected and debts paid, the executor will distribute the balance to the beneficiaries.
Also, your brother should know that, as an executor, he should avoid the possibility of any conflict of interest between his duties and responsibilities as an executor and his personal wishes. As a beneficiary, you have the right to demand that the estate be properly administered in accordance with a will.
Therefore, if your brother has paid off the estate debt, he should distribute your share of the estate to you. The distribution will be by liquidating the assets in the estate and dividing the cash equally or by transferring the assets to your joint name.
According to you, the will does not make specific arrangements for the holiday home and its sale is an agreement between you. While you technically cannot force your brother to sell the vacation home, you can suggest that if he wishes to keep the vacation home for himself as a beneficiary, he can either use his own funds or take his share of the property.
I recommend that you and your brother seek an amicable solution to this issue, mediation may help resolve this issue. Legal action can only be considered as a last resort.
If you cannot resolve the matter amicably and believe your brother has acted improperly as executor, you can apply to the court for directions to sell the property. You can also apply to have your brother removed as an executor if you are concerned that your brother will adversely affect the government.
If you apply, the court will review the manner in which the administration is being administered and will act in the best interests of the estate. It will look at the terms of the will and ignore any agreement you and your brother may have made. I do hope you and your brother can resolve this issue without legal intervention to avoid hatred.
The opinions in this column are for general information only and should not be used as a substitute for professional advice. The Financial Times Limited and the authors are not responsible for any direct or indirect results, including any losses, arising from any reliance on the reply, and are fully excluded from liability.
our next question
My wife owns an apartment that she bought with a mortgage before we met. She then went back to higher education and the apartment was rented out to provide her financial support while she was studying. If we buy a house to live in (which we will jointly own), we can remortgage the apartment to buy to rent. However, due to our current income disparity, the bank insisted on a joint mortgage on the apartment, which they said would require my name to be added to the deed and equity transfer. If this happens, can my wife continue to disclose rental income separately on her tax return, or will HMRC force me to disclose some of it? Are there any other tax considerations?
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