War in Ukraine:Investing in good

There’s a lot going on in the world right now, and the last thing you might be thinking about is the state of your savings and investments.

But the fact is, wider political and economic developments have an effect on finances, in terms of both savings and outgoings.

The key to coming out of any economic crisis in as good a shape as possible is to budget wisely and, if you invest in markets, to diversify your portfolio.

Crucially, you should also hold your nerve. Stock markets tend to bounce back in the long run and savings are long term investments, so short-term shocks shouldn’t have a lasting impact.

The war in Ukraine is also an economic crisis

The war in Ukraine is already the cause of serious stock market volatility. Early in March, the FTSE 100 recorded its worst week in a year.

This is trivial compared to the war’s human cost, of course, but wars inevitably have economic consequences too. That’s especially true in a world of international trade and globalised supply chains.

Severe and widespread international sanctions have been levied against the Russian economy, to limit its ability to wage war. At the same time, many Western countries have vowed to wean themselves off their dependency on Russian oil and gas.

All of this is entirely justifiable in the current circumstances, but it will have a knock-on effect on the cost of living around the world.

Oil and gas prices might rise further, affecting household bills and the price of a wide variety of goods. Both Ukraine and Russia are big food producers, so some supermarket prices are likely to be pushed up too.

Protecting household finances

In UK terms, any economic fallout from the conflict will only add to a cost of living crisis that was already gathering pace before the war.

The British Chambers of Commerce (BCC) has already cut its growth forecast for the British economy to 3.6% from 4.2%, thanks to soaring inflation, tax rises, and global shocks including Ukraine.

In these circumstances, individuals can seem a bit helpless. Our own standard of living can seem entirely at the mercy of forces outside our control.

But – while it’s true that we can’t control inflation or tax hikes – we can take measures to protect our household finances.

Some of these are obvious. We can buy cheaper supermarket own-brand goods, for example, and leave the big names on the shelf. An easy way to minimise the impact of rising gas prices is to turn the thermostat down a notch or two.

And if we walk or cycle short distances instead of getting in the car, we’ll be doing our health, our finances and the planet a power of good.

Another thing we can all do is talk to an independent financial advisor. They can help with household budgeting, which in turns means that finances might be protected and savings topped up, even in the midst of a cost of living crisis.  

Protecting your savings

What happens to our investments isn’t completely out of our control, either. It’s possible to protect them to some extent, even in a volatile market.

The first thing to do is actually to not do anything. Or at least, don’t do anything rash. As we’ve said, stock markets often bounce back strongly from shocks, and at time of writing the FTSE 100 has already recovered the losses it suffered at the start of the war.

There may be more volatility to come, but steep movements in either direction should not necessarily be a cause for panic. What goes down can come straight back up again. As far as most savings and pensions are concerned, long-term trends are more important than short-term swings.

The main thing is to stay in touch with your financial advisor and, if you’re concerned, spend some time going over your financial position.

What we would advise is that you gain a detailed understanding of where your funds are invested. Ask your advisor to go through it with you if necessary. The key is to make sure you’re spreading risk by investing in diverse portfolios that include stocks from a range of sectors.

Investing for good

The war in Ukraine is, first and foremost, a humanitarian tragedy. Economic concerns can seem trivial by comparison.

And yet we all need to pay our bills and, if possible, save for the future. The current situation simply makes that more difficult, by spreading economic uncertainty to both stock markets and the wider economy. It is only likely to fuel inflationary pressures that were gathering pace long before the crisis in Ukraine. 

It’s not a time for panic, however. Sensible budgeting and investment advice are the best ways to save in a time of turmoil. Your independent financial advisor can help in both these areas.

They can help you manage your finances in a way that gives you the best chance to protect savings and pensions, and even increase your savings pots over time. In which case, if you can afford it, you may decide to use any extra cash to help the humanitarian effort in Ukraine, proving that good investments really can do good. 

For more information on household budgeting, protecting savings and diversifying investments, please call or e-mail us via our contact form.