UK shares to help fight inflation

Inflation could prove to be an issue in the years ahead. But UK shares like these could help my portfolio sail through any choppy economic waters.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

One English pound placed on a graph to represent an economic down turn

Image source: Getty Images

Inflation has been on a bit of a gallop recently. I’ve found it difficult to avoid rising prices with many purchases. So, as an investor in UK shares, should I worry? There are a few ‘ifs’ and ‘buts’ to consider before answering that question.

Rampant inflation isn’t certain

For example, high and accelerating 1970’s-style inflation can make it difficult for businesses to keep up. So short-term profits could fall in real terms and act as a drag on share prices.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

However, even under high-inflation conditions stocks can be a decent place to invest money over the long term if the underlying businesses can raise their selling prices.

But inflation doesn’t worry me. The mood music from governments on both sides of the Atlantic sounds as if they think the recent spurt in inflation may prove to be transitory. Neither the US nor the UK has plans for a rapid ramp-up of interest rates to fight inflation.

In May, the Bank of England’s Monetary Policy Committee predicted Consumer Price Index (CPI) inflation will be somewhere close to its 2% target as far ahead as the middle of 2022. And the government set the 2% level for a reason — modest inflation tends to stimulate economic activity.

But if inflation does gain traction, the traditional advice is to turn to assets such as gold, commodities, property and bonds. But I’ll not be bothering with those. Prices are hard to predict. And gold and commodities, for example, have already been riding high for some time.

It’s easy to get on the wrong side of a trade when investing in vehicles that simply track prices. After all, gold, commodities and property prices tend to cycle up and down.

UK shares — so often the answer

But if I do want to try to build some inflation protection into my portfolio I can do it with UK shares. For example, gold mining companies will likely benefit from rising gold prices. So, I’d consider companies such as Centamin and Shanta Gold.

And the big general mining firms could receive a boost from rising commodity prices, so I’d look at Anglo American, Rio Tinto and BHP.                               

Meanwhile, the many property companies listed on the London Stock Market strike me as a great alternative to investing directly in bricks and mortar. An investor will be exposed to the potential for capital gains from a rising share. And there’s the possibility of an expanding income from shareholder dividends.

Those potential benefits, and the downside risks, are similar to those gained from holding property. I’d consider property stocks such as Warehouse REIT and Tritax Big Box REIT.

However, even with the possibility of rising inflation ahead, the solution for my long-term portfolio is the same as it’s always been.

I’d aim to pick the best stocks from multiple sectors including those I’ve mentioned — sectors such as pharmaceuticals & health, fast-moving consumer goods, utilities, retail, technology, software, IT and others.

My belief is a portfolio of quality UK shares diversified between industries will likely provide a decent long-term return whatever inflation happens to be doing.

However, nothing is certain or guaranteed. And it’s still possible for me to lose money on shares despite such an approach.

Our 5 Top Shares for the New “Green Industrial Revolution"

It was released in November 2020, and make no mistake:

It’s happening.

The UK Government’s 10-point plan for a new “Green Industrial Revolution.”

PriceWaterhouse Coopers believes this trend will cost £400billion…

…That’s just here in Britain over the next 10 years.

Worldwide, the Green Industrial Revolution could be worth TRILLIONS.

It’s why I’m urging all investors to read this special presentation carefully, and learn how you can uncover the 5 companies that we believe are poised to profit from this gargantuan trend ahead!

Access this special "Green Industrial Revolution" presentation now

Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Tritax Big Box REIT and Warehouse REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

These 2 cheap shares dived last week. I’d buy 1 today

Although global stock markets rebounded hard this week, these two cheap shares were left behind in this surge. But I…

Read more »

Female friends enjoying their dessert together at a mall
Investing Articles

Down 40% in 2022, should I buy this 6.3% yield for my Stocks and Shares ISA?

Royal Mail shares have sold off aggressively due to lower parcel volumes and higher-than-expected inflation. Time to add them to…

Read more »

A person holding onto a fan of twenty pound notes
Investing Articles

3 cheap shares with dividend yields of up to 9%

These three cheap FTSE 250 shares all offer market-thrashing dividend yields of up to 8.7% a year. But which would…

Read more »

Twenty pound notes in back pocket of jeans
Investing Articles

3 passive income ideas I’m using today

Our writer shares three passive income ideas he's already using. They're dividend shares -- and he'd consider buying more of…

Read more »

Close-up of British bank notes
Investing Articles

Is now a good time to buy dividend shares?

As economic pressures increase, concerns are growing over dividend shares. Here's why I think it's right to buy now, not…

Read more »

Middle age senior woman sitting at the table at home working using computer laptop clueless and confused expression with arms and hands raised.
Investing Articles

Is now a good time to buy UK stocks?

Markets remain volatile but this Fool doesn't care. He's busy buying great UK stocks on the cheap.

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

A top-quality growth stock to buy on the dip

Growth stocks have sunk this year, with inflationary pressures being the primary reason. Here's one that looks unfairly beaten-down.

Read more »

Gold bullion on a chart
Investing Articles

How I’m protecting my portfolio from a stock market crash in 2022

I am investing in this asset class to protect my portfolio from high inflation, slower growth, or a stock market…

Read more »