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Effect Of The Current Inflation Rate On Investment – Edison Totime Writes

Edison Mawuli Totimeh, a financial advisor has penned down some important factors investors should consider when investing at this time crucial moment. He took into consideration the current inflation rate and it’s impact on your returns.

He stated;

In recent times, we have seen some external shocks hitting the Ghanaian economy which in effect making the lives of the citizens difficult. The strength of the Ghanaian economy had not been exposed to test until the inception of Covid-19 in Ghana in March 2020 which has brought businesses halted. As a result of global conditions, including a rise in crude oil and other commodity prices and the Russian-Ukraine conflict, the macroeconomic fundamentals now have taken a nosedive and are impacting individuals and businesses. Public sentiments as a result of the impact of the failing economy have intensified this year. General price levels have escalated significantly drying up the pockets of the citizens.

As of January 2022 inflation rose 13.9% further to 15.7% in February and hit 19.4% in March the highest Ghana has recorded in 13years.

During inflationary periods, the value of your cash holdings will erode over time, perhaps substantially and the purchasing power of securities (bonds) coupon income, diminishing the present value of its future fixed cash flows. Accelerating inflation is even more detrimental to longer-term bonds, given the compounding impact of lower purchasing power for cash flows received far in the future.

In theory , if In January 2022, the cost of 5kg of rice Ghs40, the cost of same 5kg of rice as at today will be Ghs51 because inflation has seen 28.35% point higher than the 13.9% recorded in January 2022. That means overall prices increased by 28.35%for the first quarter of this year .

 

HOW DOES INFLATION AFFECTS YOUR INVESTMENT?

Assets with fixed, long-term cash flows tend to perform poorly when inflation is rising, since the purchasing power of those future cash flows falls over time. Contrarily, assets with adjustable cash flows (e.g., property rental income) tend to perform better with rising inflation.

 

FIXED INCOME INVESTMENTS

Typically, investors buy fixed income securities such as bonds  because they want a stable income stream in the form of coupon payments. However, since the rate of interest remains the same on most fixed income securities until maturity, the purchasing power of the interest payments declines as inflation rises. As a result, bond prices tend to fall when inflation is increasing.

Most bonds make fixed interest, or coupon payments. Rising inflation erodes the purchasing power of a bond’s future (fixed) coupon income, reducing the present value of its future fixed cash flows. Accelerating inflation is even more detrimental to longer-term bonds, given the cumulative impact of lower purchasing power for cash flows received far in the future.

 

SAVINGS

Inflation can shrink your savings even if you’ve secured your funds in a savings account with an average interest rate.

In theory, when you’re working, your earnings should keep pace with inflation. When you’re living off your savings, as in retirement, inflation diminishes your buying power. It’s important to factor inflation into your retirement savings to ensure you have enough assets to last through your retirement years.

 

RECOMMENDATION

It’s important to factor in inflation when planning your investment. so it may be a good time to revisit your portfolio and confirm whether you still feel confident. Marginal percentage addition of your investment amount to mitigate inflation risk since this will shore up the interest on your investment.

Edison M.Totime

These are the current rates as of Today

INTERBANK FOREX RATES 💴💰
US$GH¢ Buy 7.1088 Sell 7.1160
GB£GH¢ Buy 9.1235 Sell 9.1333
CHFGH¢ Buy 7.4120 Sell 7.4194
AUD$GH¢ Buy 5.1539 Sell 5.1603
CAD$GH¢ Buy 5.5887 Sell 5.5943
JP¥GH¢ Buy 0.0552 Sell 0.0552
NZDGH¢ Buy 4.7132 Sell 4.7201
ZARGH¢ Buy 0.4559 Sell 0.4561
EU€GH¢ Buy 7.6636 Sell 7.6712
CHN¥GH¢ Buy 1.0923 Sell 1.0933
GH¢CFA Buy 85.5090 Sell 85.5938
GH¢NG₦ Buy 58.3600 Sell 58.5752

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💵Bloomberg USDGHS Cross Rate – *7.5182* (YTD – 21.57🔺️%)

💰STANBIC BANK FX RATES💵
US$GH¢ Buy 7.2000 Sell 7.8000
GB£GH¢ Buy 9.2765 Sell 10.0994
EU€GH¢ Buy 7.7566 Sell 8.4529
CH¥GH¢ Buy 1.1083 Sell 1.2121

🔼GSE DAILY GAINERS ➖ PRICE ➖ %CHANGE
No gainers for today

🔻GSE DAILY LOSERS ➖ PRICE ➖ %CHANGE
No losers for today

〽Inflation rate in Ghana ➡ 19.40% (🔺️+23.57%)

🏦Ghana Reference Rate ➡ 16.58% (🔺️+16.93%)

✳Policy Rate in Ghana ➡ 17.00% (🔽+17.24%)

¶ TREASURY RATES💸
91 – Day Discount Rate 16.1057% Interest Rate 16.7814%
182 – Day Discount Rate 16.0279% Interest Rate 17.4243%
364 – Day Discount Rate 16.4393% Interest Rate 19.6735%
1 Year Fixed Note Interest Rate 16.5672%
2 Year Fixed Note Interest Rate 19.7500%
3 Year Bond Interest Rate 20.8500%
5 Year Bond Interest Rate 20.7500%
6 Year Bond Interest Rate 21.7500%
7 Year Bond Interest Rate 18.1000%
10 Year Bond Interest Rate 19.7500%
20 Year Fixed Rate Bond 20.2000%

🛢Petroleum Products – Average Price
🏗Petrol – Gh¢9.35/ltr (YTD -🔺️+38.52%)
🛢Diesel – Gh¢9.79/ltr (YTD -🔺️+45.03%)
⛽LPG – Gh¢10.25/kg (YTD -🔺️+26.23%)

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*GSE Composite Index 2,697.02 0.00 0.00%
*GSE Financial Index 2,219.66 0.00 0.00%

GSE INDEXES ⏸ 2022 YTD RETURNS%
*GSE Composite Index 2,697.02 🔻-3.31%
*GSE Financial Index 2,219.66 🔼+3.15%

🔼GSE 2022 GAINERS ➖ PRICE ➖ YTD%
SIC ➡Gh¢0.26 🔼+225.00%
ETI ➡Gh¢0.20 🔼+42.86%
GGBL ➡Gh¢2.25 🔼+25.00%
EGL ➡Gh¢3.30 🔼+18.28%
TBL ➡Gh¢0.40 🔼+17.65%

🔻GSE 2022 LOSERS ➖ PRICE ➖ YTD%
PBC ➡Gh¢0.02 🔻-33.33%
ACCESS ➡Gh¢2.29 🔻-27.30%
FML ➡Gh¢3.00 🔻-25.00%
IIL ➡Gh¢0.04 🔻-20.00%
MTNGH ➡Gh¢1.00 🔻-9.91%

💧MUTUAL FUNDS IN GHANA♣
📈EQUITY FUNDS ➰YTD%
Databank EPAcK 🔼+4.39%
Republic Equity Trust 🔼+1.74%
Heritage Fund 🔻-0.30%
SAS Fortune Fund 🔻-0.51%

⚖BALANCED FUNDS ⏸ YTD%
EDC Balanced 🔼+3.67%
Databank Bfund 🔼+3.33%
CDH Balanced Fund 🔼+2.34%
Fidelity Balanced Trust 🔼+3.37%
CCMF 🔼+5.56%
CM Fund 🔼+3.78%
Dalex Vision Fund 🔼+5.50%
Plus Balanced Fund 🔼+6.22%
Elite Mutual Fund 🔼+4.21%
Republic Future Plan Trust 🔼+2.17%
UMB Balanced Fund 🔼+2.68%
Databank EdiFund Tier 2 🔼+3.75%

⚙FIXED INCOME FUNDS 🛡YTD%
EDC Fixed Income 🔼+4.79%
Databank Mfund 🔼+5.36%
Fidelity Fixed Income Trust 🔼+4.21%
Financial Independence Fund 🔼+4.50%
Fixed Income Alpha Plus 🔼+5.56%
Nimed Fixed Income Fund Tier 1 🔼+4.36%
Nimed Fixed Income Fund Tier 2 🔼+4.79%
Plus Income Fund 🔼+5.64%
STANLIB Income Fund Trust 🔼+5.23%
Databank EdiFund T1 🔼+5.16%
MONEY MARKET FUNDS ⏱YTD%
SAS Midas Fund 🔼+4.38%
Octane DC Money Market Fund 🔼+4.20%
First Fund 🔼+3.60%
Stanlib Cash Trust 🔼+4.41%
EDC Money Market Fund 🔼+4.44%
Republic Unit Trust 🔼+3.54%

COMMODITIES MARKET
*Brent Crude $/barrel⛽ $106.65 -1.68 -1.55%
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*Corn 🌽 $/bushel $789.00 -6.25 -0.79%
*Cocoa 🍫 $/metric ton $2,554.00 -38.00 -1.47%
*Coffee ☕ $/pound $227.15 -0.95 -0.42%
*Sugar🎂 $/pound $19.21 -0.60 -3.03%
*Lumber $/1000 board feet $935.60 -34.40 -3.55%
Rubber USd/100kg $166.10 -3.60 -2.12%

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