Alternative investments to beat inflation

Although inflation dipped slightly over the last month, it still sits at a galling 9.9 per cent, painfully close to the 40-year high of 10 per cent it reached in July.

In comparison, the Bank of England’s base rate currently sits at 1.75 per cent this year and the best easy-access cash savings rate stands at just 1.85 per cent, meaning that investing is the only way to try and preserve your wealth.

Diversification is a key way of mitigating risk, which is why increasing numbers of investors are looking away from the volatile stock market to hedge their portfolio against inflation.

An attractive alternative to listed equities is peer-to-peer investing, which enables you to lend to consumers, businesses and property professionals. Some of these investments can also be held within an Innovative Finance ISA (IFISA) wrapper, meaning you can enjoy tax-free returns on your income.

Read more: How to address inflation with your P2P portfolio

Not all P2P investments can beat inflation at its current rate, but they may earn you better returns than a cash savings account. However, it should be noted that all investments carry a degree of risk, meaning you may lose some of your capital, and P2P lending is not Financial Services Compensation Scheme-protected.

Business lending

There are a number of P2P platforms on the market which lend to small businesses, enabling investors to support entrepreneurs while earning solid returns.

For example, ArchOver offers returns of up to 10.5 per cent on secured business loans, while Crowd2Fund targets returns ranging between six and 15 per cent to back British entrepreneurs.

Crowdstacker offers secured business loans, starting with a minimum investment of £100, and offers returns of between 4 and 12 per cent.

Property lending

Investors often flock to property, enjoying the security of bricks and mortar. While you can invest in property as a buy-to-let landlord, or through a real estate investment trust, you can also opt for a plethora of P2P property investment options.

P2P property investing removes the hassle of being a landlord and the volatility of being linked to stock market sentiment.

You can access residential property developments through the likes of CapitalRise and CrowdProperty, offering returns of up to 12 per cent and eight per cent respectively. Sourced Capital also funds property development loans and offers returns of up to 10 per cent.

Meanwhile, you can access buy-to-let and bridging loans through LandlordInvest and Kuflink, earning up to 12 per cent and 7.44 per cent respectively.

Consumer lending 

While property platforms now dominate the P2P sector, there are still several consumer lenders in the market. These platforms often spread out investors’ funds across a larger number of loans using auto-invest products, providing extra diversity.

Read more: Rising inflation and falling saving rates present new opportunity for P2P

Fund Ourselves positions itself as a more ethical alternative to payday lenders and offers returns of up to 15 per cent, while you can access returns of up to 10 per cent through P2P pawnbroker Unbolted.

And new P2P consumer lender Plend uses open banking technology to support its underwriting. Last month, it revealed that it had already lent out £500,000 since launching in beta mode in mid-May.