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How to protect your money as Britain descends into chaos

·4 min read
wealth savings investing
wealth savings investing

Savers are fighting off danger from all sides. DIY investors must tackle falling stock markets, rampant inflation and now the collapse of the Government.

While the imminent resignation of Boris Johnson has led to a small rise in the pound against the dollar, the continued uncertainty means that Britain’s currency remains at lows not seen since 2020.

But there are ways to protect your wealth, even as chaos plagues Britain’s economic and political landscape. The Telegraph reveals how you can keep your savings intact.

Don’t blame Britain’s stock market

Investors should not sell British stocks because of the chaos unfolding in Westminster.  Now could be a good time to invest more in the FTSE 100, an index which tracks the largest companies listed in London, while the pound is at record low levels against the dollar.

This is because most of the businesses in the FTSE 100 derive the majority of their revenues abroad. When the pound is low, this makes their products relatively cheaper to their foreign clients, which in turn makes their business more competitive. The FTSE has already risen ahead of Mr Johnson’s expected resignation.

Matt Roche, of the investment manager Killik, said the FTSE 100 had suffered smaller losses this year than many other global markets, thanks to share price rises at oil and gas companies.

“British stocks are enjoying their time in the sun,” he said. “Our market is skewed to a narrow range of sectors such as energy, mining and banks, which have all done exceptionally well this year. The likes of BP and Shell have performed very strongly thanks to rising oil prices.”

Mr Roche also highlighted the healthcare sector in London, where pharmaceutical giants AstraZeneca and GlaxoSmithKline are global leaders. “Healthcare is a great area to invest in because a lot of the spending in this area is not discretionary,” he said. “This makes it a robust, defensive investment.”

A simple FTSE 100 tracker is a cost-effective way to invest in the largest companies listed in London. The iShares Core FTSE 100 is a popular option, with an ongoing charge of 0.07pc a year.

The funds designed to preserve your money

For more conservative investors, funds that are designed to help preserve your money during periods of economic and political stress may be preferable.

Popular “wealth preservation” trusts include the Ruffer Investment Company, which had almost 11pc of its assets invested in gold. The yellow metal is traditionally viewed as a safe store of value during economic downturns and has helped support the trust’s performance this year. In the past three years, Ruffer has delivered investors a return of 41pc.

The City of London investment trust is another popular option, not least because of its dividend record. It has raised its payout for 56 consecutive years, and boasts a yield of 4.9pc. You can find a full list of The Telegraph’s favourite defensive funds here.

Invest in bricks and mortar

Investing in “real” assets has become an increasingly important defensive strategy for investors in the current climate. This involves investing in tangible projects such as infrastructure and real estate, which can help diversify a portfolio away from just traditional stocks.

Luke Hyde-Smith, of the investment manager Waverton, said the property sector was a popular option. “Investments in property and other real assets are very appealing because they have robust levels of cash to support them,” he said. “Some property investment trusts also have inflation-linked income and are less dependent on the health of the rest of the economy.”

Mr Hyde-Smith highlighted the Supermarket Income Reit, which rents out commercial properties across the country to supermarkets such as Tesco and Morrisons. The £1.2bn trust has delivered returns of 32pc over the past three years.

Mr Hyde-Smith said the infrastructure sector also offered investors access to valuable real assets. He highlighted the SDCL Energy Efficiency Income trust, which has returned 24pc in three years.

“Everyone is talking about the move to renewable energy away from fossil fuels,” he said. “But not everyone is focusing enough on how much energy we waste. This is a great opportunity, especially as power prices are now more expensive. Both consumers and businesses are trying to use energy more efficiently, and that requires more investment in our infrastructure.”