How to invest to beat inflation: 3 charts that show what works

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

Interestingly, there was a clear turning point in cash's ability to beat inflation. In our analysis, cash kept pace with or beat inflation in every rolling five-year period ending between 1993 and 2010. But from February 2011 onwards, it failed to beat inflation in a single five-year period. The picture was similar over longer time horizons: cash failed to beat inflation in every rolling 10-year period ending from December 2013, and every rolling 20-year period ending from April 2021.

The findings suggest that, for someone wanting to grow the value of their money in real, inflation-adjusted terms over the long-term, investing in stocks and shares is likely to give them a much better chance of doing so than holding cash savings. What’s more, the longer you hold those investments, the greater your chances are of beating inflation.

This is important for savers of all ages – but especially those in their 50s and 60s. As people near retirement, they often look to reduce risk in their portfolios by moving from stocks into assets such as bonds or cash.

In some circumstances, for example if you're planning to buy an annuity or need to access your money in the near future, that can be the right decision. However, for retirees who may need their savings to last for several decades, inflation remains an important risk.

• Read: How to inflation-proof your retirement savings

Moving too much into cash could mean their savings gradually lose purchasing power, making it harder to maintain their standard of living throughout retirement.

Which investments have been best at beating inflation?

Many homeowners have enjoyed substantial house price growth over their lifetimes, giving some the impression that property is the ultimate inflation-beating asset class. However, data from the past 10 years suggests this may be far from the case.

We looked at the real returns – the returns after inflation – of various asset classes over the three, five and 10 years to the end of August 2026. The data showed that UK house prices have failed to beat inflation in each of those periods. Once inflation has been accounted for, UK property prices have actually fallen by 5% over three years, 10% over five years and 3% over 10 years.

These figures look at house prices alone, rather than the total returns landlords might receive from a property, including rental income.

Of course, property is not just an investment. For the majority of us, it’s the roof over our heads. However, there are many people who follow the strategy of “buy the biggest house possible and hope to benefit from house price growth” as part of their retirement planning. It’s therefore important to scrutinise whether property value growth has lived up to its reputation and how it measures up to other assets.

• Read: ISA, pension or pay down mortgage - which is best?

Global government bonds performed similarly poorly, delivering negative real returns over the past three, five and 10 years. Global corporate bonds also struggled, failing to beat inflation over five and 10 years, although they managed a small positive real return of around 1% over three years.

The only asset classes to beat inflation consistently were global stocks and gold. Global stock markets delivered a real return, after inflation, of 51% over three years, 36% over five years and 133% over 10 years.

Gold had an incredible run between 2024 and early 2026 so is the clear winner over three and five years (with a real return of 90% and 87% respectively). Yet over 10 years it was pipped by global stocks.

People often say that gold is a good hedge against inflation as it has a limited supply and is believed to preserve its value over time. This can be true in times of extreme or unexpected inflation, for example in the 1970s when trust in central bank currencies collapsed. However, there have also been periods of moderate, persistent inflation where gold has fallen in value.

Another reason people buy gold is because they believe it can outperform in periods of economic or geopolitical uncertainty, although it’s important to note that its price doesn't always rise during a crisis. Finally, some investors simply won’t be comfortable with the sharp volatility that comes from investing in gold.

It’s important to remember that the past is neither a guide nor a guarantee of future performance. The returns of each of these asset classes could look very different in future.

• Read: What is the best way to invest in gold - ETFs or gold miners?

Which stock market has been best at beating inflation?

Global stock markets are a broad church, and some markets have done much better than others at beating inflation.

We compared stock markets across the UK, US, Europe, China and emerging markets over the same three periods. The analysis revealed a mixed picture.

Over three years, emerging markets did best at beating inflation, with a real return of 62%, followed by the US at 52%. Over five years, the US came first with the UK second, and over 10 years it was the US on top once more followed by Europe.

These mixed results reflect the importance of having a diversified portfolio. Ultimately, most of us won’t be able to guess which stock market will deliver the best returns over a given period. Therefore, one of the strategies often favoured by investors is to simply invest broadly around the world, for example via a global tracker fund.

• Read: Which global index fund is best for you?

All returns are measured in pounds sterling, meaning the performance of overseas investments also reflects changes in exchange rates.

Is investing right for you?

Investing isn't right for everyone or every financial goal. Stock markets can fall sharply, so money you expect to need within the next few years may be better kept in cash.

However, for those saving towards goals further into the future, inflation is a risk that shouldn't be overlooked. While cash can protect the nominal value of your savings, it doesn't always protect what that money can buy.

The lesson from these charts is that, historically, investing for the long term and spreading your money across different markets has offered a better opportunity to grow your wealth ahead of inflation than simply leaving it in cash.

Source:

¹ Returns of cash savings modelling using a combination of Libor and Sonia. These are benchmark rates rather than the interest rates available on individual savings accounts. Inflation modelled using the Consumer Price Index (CPI).