This week saw that latest inflation figures published.  The marked jump in the consumer prices index (CPI) from 3.7% in December to 4.0% in January was attributed to the VAT rate rise and increases to the price of crude oil.  The retail prices index now stands at a hefty 5.1% – up from 4.8% in December.

In order to maintain purchasing power in this environment, returns from investments need to match inflation. With the Bank of England base rate still set at its 350 year low of 0.5% the value of cash deposits is falling in real terms.  Very few savers (if any) are getting a rate of return anywhere near 4.0%. Even less appreciate that cash is a high risk investment in these high inflation, low interest rate conditions.

The alternative is to gain exposure to investments that have the potential to deliver long term returns ahead of inflation.  This is best achieved with an element of equity investing.  All our portfolios have an exposure to the FTSE All Share index (although actual exposure is dependent on appetite for investment risk).

The FTSE All Share index, representing the performance of all 625 eligible companies listed on the London Stock Exchange has finished the week at 3,154.10, a slight drop from its opening value of 3,155.96 during Friday’s trading and 10.21 points higher than its 3,143.89 opening value at the start of the week.

So far this year the FTSE All Share index, which accounts for approximately 98% of the UK’s market capitalisation, has risen 91.25 points from its’ opening value of 3062.85 at the start of trading on 4^th January 2011 – a gain of 2.89%.