Inflation is a huge problem for UK savers right now. Here in the UK, inflation hit a 10-year high of 5.1% in November. That means money sitting in the bank earning 1% is losing its value fast.
The good news is there are ways we can protect ourselves against inflation. Investing some of our money (money we can afford to put away for the long term) in shares is one way as shares tend to rise more than inflation over the long run. With that in mind, here’s a look at three UK shares I’d buy for 2022 to protect myself against inflation.
UK shares to beat inflation
One group of stocks that typically does quite well when inflation is high is real estate investment trusts (REITs). That’s because real estate prices tend to rise alongside inflation. Additionally, landlords can put their rents up.
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In the UK, there are a number of good REITs in the FTSE 350. One of my favorites is Tritax Big Box (LSE: BBOX). It owns and manages a portfolio of large-scale ‘big box’ warehouses let out to major retailers such as Amazon and Tesco.
There are a number of things I like about BBOX from an inflation-protection perspective. Firstly, around half of its rent reviews are linked to consumer price increases. This means it should be able to raise rents if inflation stays high. Secondly, the strong growth of the e-commerce industry is supporting real estate prices.
There are risks here, of course. One is that the company sometimes needs to raise money from shareholders to fund its growth. This can impact the share price in the short term. I’m comfortable with this risk as I think the company’s long-term prospects are excellent.
Inflation protection
Another stock I believe could offer protection against inflation is Rightmove (LSE:RMV). It operates the UK’s largest property website.
There are two main reasons I like RMV in the current environment. The first is that it has a very dominant market position. This means it should have the ability to raise its prices.
Secondly, it’s business model is well suited to a high-inflation environment. As an internet company, it doesn’t need to worry about things like raw materials or transport costs like many ‘old-economy’ companies do.
One risk here is further lockdowns. If we see these return in 2022, RMV’s revenues may fall.
Overall however, I think the risk/reward proposition is attractive. The forward-looking P/E ratio of 32 seems reasonable to me.
Long-term growth story
Finally, I also like Prudential (LSE: PRU) for inflation protection. It’s a leading insurance company that’s focused on Asia and Africa.
The reason I like PRU is that when inflation is high, interest rates tend to rise. This is good for insurers because they can earn a higher level of income on their investments.
I also like the fact that the company is focused on Asia and Africa. These are untapped markets from a financial services perspective, meaning the long-term potential here is significant.
A risk to consider here is that insurance stocks can be volatile. When markets wobble, these stocks can fall further than the market as a whole.
I’m not put off by this risk however. I think Prudential has the potential to deliver attractive returns in the years ahead.
