Throughout its development, your savings are threatened by two very different forces. The first is slow, silent, almost invisible: inflation, which gradually erodes your purchasing power each year. The second is brutal and spectacular: market cycles, those phases of euphoria followed by corrections that can melt a portfolio in a matter of weeks. In the face of these two threats, keeping your money 'safe' in a current account is not protection; it is often the worst strategy. In this guide, I will simply explain how each one acts, which investments truly resist them, and most importantly, what method to follow to build a solid savings plan capable of weathering storms.
How to Protect Your Savings from Inflation and Market Cycles?
Note: this article is educational and does not constitute investment advice or individualized tax advice. Your personal situation (age, income, horizon, goals) may modify the applicable rules. For significant amounts, consult a professional and verify official sources.
Inflation and Market Cycles: Two Very Different Threats
Before trying to protect yourself, you need to understand what you are fighting against. Because these two enemies of your savings do not act in the same way at all.
Inflation, the Silent Erosion
Inflation is the general and sustained increase in prices.
In practical terms: with the same amount, you buy a little less each year. If your money sits idle without earning anything while prices rise, you are becoming poorer without even realizing it...
The right reflex is to think in real terms: you need to determine the return on your investment minus inflation. A savings account that yields 2% when inflation is at 3% makes you lose 1% of purchasing power per year. The displayed figure is positive, but in reality, your money is declining!
Let's take an example: invest €10,000 in an asset that yields 1% net, with inflation at 2.5%. After ten years, your statement shows a slight increase in capital... but in real purchasing power, you have lost the equivalent of over a thousand euros.
Inflation makes no noise, but it works every day. And don't count on low inflation to save you: even moderate inflation continues to reduce the real value of your savings.
Market Cycles, the Jumps
Financial markets never rise in a straight line; they move in cycles: phases of rising, sometimes euphoric, followed by corrections, or even crashes. This is extremely destabilizing when you are starting out, especially when you see your portfolio drop by 20 or 30% in the midst of a storm.
But here’s what you need to keep in mind: crashes are an integral part of economic cycles, and historically, markets eventually recover in the long term. The real danger is not the drop itself; it’s selling at the worst moment, out of panic, and turning a virtual loss into a permanent loss.
Why Protect Against Both at Once
The trap is that protecting against one threat can expose you to the other. Fleeing market volatility by keeping everything in cash? You are then eroded by inflation. Trying to beat inflation by betting everything on stocks? You are hit hard by market cycles.
The right strategy is not to choose a side but to build a balance. This is the purpose of the rest of the article.
Letting Your Money Sit: The False Security
Many savers think that 'safe' money is money that doesn’t move. This is a persistent and costly misconception.
The current account earns nothing: every euro that stagnates loses value mechanically with inflation. Regulated savings accounts (Livret A, LDDS) do better: they are liquid, guaranteed, and tax-exempt. But their returns rarely keep pace with inflation over time. They protect your nominal capital, not your purchasing power.
The same logic applies to the euro funds of life insurance, whose guarantee reassures but does not shield against monetary erosion.
Should you invest everything then? No, and this is a crucial point to understand. A portion of your savings must remain liquid and risk-free: this is your emergency fund, which allows you to face unexpected events without touching your investments. The message is therefore not 'never keep cash', but 'do not let all your money sit idle'.
Which Investments Truly Protect Against Inflation?
Not all investments are equal in the face of rising prices. Here’s a quick overview of those that stand out and those to handle with caution.
Real Assets: Real Estate and Paper Assets
Real estate is historically considered a safe haven against inflation: rents and prices tend to follow the general increase. The problem: buying a property directly requires significant capital and concentrates risk on a single address.
Paper assets (the SCPI) circumvent this obstacle. For a few hundred or thousand euros, you become a co-owner of a diversified portfolio of buildings, offices, shops, logistics, often at a European scale. You pool rental risk and receive regular income. In return: entry fees, limited liquidity, and never guaranteed returns.
Stocks in the Long Term
Over the long term, stocks are among the best defenses against inflation: companies pass on price increases to their rates, and their profits, thus their value, grow with the economy. Through an ETF (index fund), you expose yourself to hundreds of companies at once, at lower costs.
The downside, you already know: volatility. Stocks are hit hard by market cycles. They should only be considered over a long horizon, ideally eight years or more, the time needed to absorb the shocks.
Gold and Safe Haven Assets
Gold has a precious characteristic: it is a counter-cyclical asset. Investors flock to it precisely in times of uncertainty, when markets are shaky! It pays no income and its price can be volatile, but it plays an insurance role in a diversified portfolio. It can be easily accessed through coins, bars, or ETFs backed by the metal.
Inflation-Linked Bonds
There are bonds whose capital and interest are adjusted based on inflation (like the OATi from the French state). Their logic is clear: when prices rise, your remuneration rises too. This is a direct protection to integrate according to your profile.
Handle with Caution
Conversely, some investments offer a false sense of security in times of inflation: euro funds and fixed-rate bonds, whose fixed returns can fall below inflation, and savings accounts, useful for liquidity but rarely for performance. They have their place, to secure, not to grow.
Protecting Against Market Cycles: Diversification and Decorrelation
Against inflation, we choose the right assets. Against market cycles, we change our logic: it’s no longer so much about what to buy, but how to allocate.
The Principle of Decorrelation
Decorrelation is the situation where two assets do not move in the same direction at the same time. When one falls, the other holds steady or even rises. By combining uncorrelated assets in a portfolio, you reduce overall volatility without necessarily sacrificing returns. This is the foundation of diversification, and its benefit is clear: in the event of a shock, not everything collapses at once.
The Rule of the Decoupled Pocket
An approach advocated by many advisors is to allocate about 10 to 15% of your wealth to real and uncorrelated assets. This portion is significant enough to cushion a stock market shock while keeping the bulk of your wealth liquid and available, and it is in this pocket that gold, unlisted real estate, private equity... or crowdlending reside, we will come to that.
Diversifying on Three Levels
True diversification operates on three levers simultaneously: asset classes (stocks, real estate, bonds, gold, private debt...), sectors of activity, and geographical areas. American or emerging economic cycles do not necessarily follow those of the euro area: this geographical dispersion is an additional buffer.
Be careful not to confuse diversification with dispersion: holding three life insurance policies filled with the same funds does not diversify anything; it just complicates management.
The Limit to Know
Let’s be honest: diversification is not the ultimate shield against declining returns. During a systemic crash, correlations increase and most assets decline together, precisely when you would need protection the most. Diversification limits specific risks; it does not erase the overall market risk. Hence the importance of combining it with liquidity, a long horizon, and discipline!
The Method to Build a Resilient Savings Plan
Enough theory. Here’s, step by step, how to translate all this into a concrete strategy.
Step 1, Build an Emergency Fund
Before investing anything, set aside the equivalent of three to six months of current expenses, in a liquid and risk-free support (Livret A, LDDS). This is your safety net: it prevents you from having to sell your investments at the worst moment in case of a setback.
Step 2, Define Your Horizon and Risk Tolerance
How long can you lock up this money? How would you react if you saw your portfolio drop by 20%? These two questions determine your allocation. The longer your horizon, the more you can withstand volatility, and thus aim for higher-performing assets.
Step 3, Allocate in a 'Pyramid'
A balanced allocation resembles a pyramid: a secure base (emergency fund, euro funds) for stability, a core of assets (stocks/ETFs, real estate/SCPI) for long-term growth, and a peak of alternative and uncorrelated assets (the famous 10 to 15% pocket) to energize and cushion. The proportions depend on your profile, but the logic remains the same.
Step 4, Invest Gradually
No one knows how to 'time' the market, not even professionals. Rather than placing everything at once hoping to hit the right moment, invest regularly, in small amounts: this is what is called DCA, or dollar-cost averaging. This way, you smooth your entry price and spare yourself the stress of buying at the peak.
Step 5, Rebalance and Stay Disciplined
Over time, your allocation distorts: one asset class rises faster than the others. Periodically rebalance to return to your target. And above all, stay the course. The worst enemy of the saver is not volatility; it’s the panic that drives you to sell low and buy high.
Where to Place the 'Decoupled Assets' Pocket? The Role of Crowdlending
This is where crowdlending, the lending to businesses via a platform, makes perfect sense (for a complete reminder of how it works, see our guide crowdfunding or crowdlending).
By lending to SMEs, you receive regular interest payments, often paid monthly. Two advantages in our context:
It is little correlated to listed markets: the good performance of a loan to an SME does not depend on the daily fluctuations of the stock market. In the event of a stock market storm, this pocket continues to pay its monthly installments.
Its rates can exceed inflation: where a savings account struggles to keep up, crowdlending offers higher returns, in exchange for a higher risk, of course.
Let’s be clear about the limits, as no investment is perfect. Crowdlending is not indexed to inflation: the rate is fixed in advance. It carries a risk of borrower default, even if framed by guarantees. And your money is not very liquid, tied up until repayment. It is therefore a complement to diversification, not a standalone investment.
Maclear, for example, allows you to invest in loans to European SMEs starting from €50, within a framework regulated by Swiss law (see our guide on investing in Switzerland from France), with projects backed by guarantees and monthly repayments. A building block among others to construct this decoupled pocket.
Summary Table: Which Asset Against Which Threat?
| Asset | Inflation | Market Cycles | Liquidity | Risk |
|---|---|---|---|---|
| Cash / Livret A | Low | High | High | Low |
| Euro Funds | Low to Medium | High | Medium | Low |
| Stocks / ETFs | High (long term) | Low | High | High |
| Real Estate / SCPI | High | Medium | Low | Medium |
| Gold | Medium | High | High | Medium |
| Inflation-Linked Bonds | High | Medium | Medium | Low to Medium |
| Crowdlending / Private Debt | Medium | High | Low | Medium to High |
FAQ
Does the Livret A protect against inflation?
Not really over the long term. The Livret A protects your capital and remains fully liquid, but its rate rarely keeps pace with inflation over the long term. It is ideal for your emergency fund, not for growing your wealth.
Which investments resist inflation best?
Historically: real assets (real estate, SCPI), long-term stocks, gold as a safe haven, and inflation-linked bonds. None are without risk: their common point is to follow, in one way or another, the rise in prices.
Should you sell everything when a crash is announced?
Generally, no. Selling in a panic turns a virtual loss into a real loss. Markets operate in cycles and tend to recover in the long term. It’s better to have an emergency fund and a diversified allocation to weather the downturn without touching it.
Does diversification protect against all risks?
No. It limits risks specific to an asset, sector, or region, but not systemic risk: during a generalized crash, most assets decline together. That’s why it is combined with liquidity, a long horizon, and discipline.
Is crowdlending a good way to diversify your savings?
It can be an interesting building block: little correlated to listed markets, it generates regular income with rates often exceeding inflation. But it carries a risk of default and low liquidity: it should be considered as a complement within a diversified pocket, never as a standalone investment.
Protecting your savings is not necessarily about choosing between inflation and market cycles: it’s about guarding against both at the same time. On one side, avoid letting your money sit idle and favor assets that keep pace with or beat rising prices. On the other, diversify intelligently, maintain a pocket of uncorrelated assets, and invest with method and discipline. No strategy is without risk, but a well-constructed savings plan weathers storms far better than stagnant capital.
Want to diversify with a pocket of regular income, little correlated to listed markets? Discover the crowdlending projects offered by Maclear.
About Maclear
Maclear AG is a Swiss peer-to-peer (P2P) lending and crowdlending platform, headquartered in Switzerland. The company acts as a financial intermediary in the non-banking sector and is a member of PolyReg SRO, in accordance with Swiss financial regulations, particularly regarding AML, KYC, and GDPR. Maclear provides individual and qualified investors access to carefully selected business loan opportunities, with integrated risk assessment, a Provision Fund, and a Secondary Market for liquidity.
The content of this article is provided for informational and educational purposes only. It does not constitute investment, financial, tax, or legal advice. Peer-to-peer (P2P) lending and crowdlending investments carry a risk of partial or total loss of capital. Past performance does not predict future results. Liquidity on a secondary market is not guaranteed. Readers are encouraged to conduct their own research and consult qualified advisors before making any financial decisions. The availability of products and services may be restricted in certain jurisdictions.