Investment funds are one of the products most often chosen by small and medium-sized investors as a way to grow their savings. They are very easy to set up and also allow for diversification of monetary contributions across different financial assets. These assets come not only from equities, but also from fixed income and alternative investment models, which we will discuss in this article. They are a viable option during challenging times for the financial markets.
Within this general context, domestic investment funds are currently exceeding a 5% positive return in the first four months of the year, according to the latest data provided by the Association of Collective Investment Institutions and Pension Funds (Inverco). The data reveals that the total assets of collective investment, including funds and companies, increased by €3.072 billion in April , reaching €478.298 billion, representing a 0,6% increase compared to the previous month, March.
In the first four months of the year, asset volume increased by 5,1%. The number of investor accounts currently stands at approximately 14.168.573, representing a 3,3% decrease compared to December 2018. Meanwhile, investment funds registered net redemptions of €184 million in April. Year-to-date, they have accumulated net redemptions of €698 million . This reflects an increase in transactions by small and medium-sized investors. However, alternative investment funds have become one of the investment options available to us from this point forward.
Alternative real estate funds
This is one of the most widely marketed models offered by asset managers, aiming to outperform other, more generalist investment funds. It's important to remember that these funds are linked to one of the most prominent sectors of the national economy, specifically construction, real estate, and everything related to the building sector . While it's true that their risk exposure is significantly higher than that of more traditional investment funds, the potential reward can be greater in the form of higher returns.
These types of investment funds are characterized by greater volatility than others. That is, they exhibit a larger difference between their highest and lowest prices. However, this effect is less pronounced than buying and selling shares on the stock exchange. This is partly because these collective investment products are geared towards the medium and, above all, the long term . Beyond other technical considerations, and perhaps also from a fundamental perspective, the only drawback is that their offering is not as extensive as other investment funds, with fewer savings models and very similar structures across them.
Based on currency exchange
This is a trend that has been gaining traction in recent years among the most aggressive investors in the financial markets. Its advantage lies in the wide variety of financial assets available within this sector: the euro, dollar, Swiss franc, Japanese yen, and Norwegian krone , among others. The choice depends on the exchange rates at any given time. Despite popular belief, this type of investment carries significant risk, to the point that substantial losses can occur due to its high volatility.
On the other hand, we also cannot forget that these financial assets constitute an alternative to traditional and more conventional investments . Furthermore, there are many models from which we can choose. International asset managers place great importance on these financial assets, and as a result, they are a regular feature in their investment proposals. They offer them in different formats within their investment strategies to adapt to the real needs of their investors.
Latest trend: raw materials
This is the latest innovation offered by international asset managers to maximize savings through a different approach to the composition of investment funds with these unique characteristics. Indeed, they can encompass everything from basic food commodities, such as wheat, soybeans, or cocoa, to energy-related assets like gas or oil. They are distinguished by their significant potential for appreciation, in some cases approaching 20%. However, risks are also present, and it's essential to understand how to manage these investments based on current market conditions.
On the other hand, this is an investment that can be very attractive when equity markets are weak, given the risk of a collapse in more conventional financial markets . It can generate significant returns for small and medium-sized investors. It's also worth noting that a growing number of investment funds are incorporating these strategies into their various investment models, and they are present in all the investment portfolios offered by different national and international asset managers.
Cryptocurrency funds
This is undoubtedly the most innovative trend right now, and therefore its investment models are much more limited. To the point that very few funds of this type are being marketed by asset managers outside of our borders. They are based on various digital currencies, with Bitcoin being the most prominent, but also including other significant currencies such as Litecoin , Ethereum, etc. As you can imagine, the risk associated with these positions is enormous and far greater than that of other financial assets.
Investing in cryptocurrencies through investment funds is a more aggressive strategy that can potentially generate significant profits. However, it also carries the risk of losing substantial amounts of money due to the volatility of these unique financial assets. This is a crucial factor investors must consider to avoid unpleasant surprises. It's certainly not a recommended investment for most small and medium-sized investors, especially those lacking experience in this type of trading.
Linked to bank deposits
On the other hand, there are investment funds linked to fixed-term bank deposits. These are very conservative or defensive models and, unlike the previous ones, carry very little risk. However, the returns are very low, ranging from 0,20% to 1,50% at best. They serve as a way to build savings for the medium and long term. Conversely, they are a very simple product to understand and do not require extensive financial knowledge.
On the other hand, it's important to remember that the European Central Bank (ECB), at its April monetary policy meeting, did not introduce any changes to official interest rates . This means that the interest rates offered by these very basic investment funds will not be affected. Of course, this is a strategy that will never make us millionaires due to the low intermediation margins. However, these funds are very accessible to all types of investors. Other technical considerations will be addressed in future articles.
In this context, investment funds in general recorded a positive return of 2019% in April 1,13, so that the accumulated profitability in the year stands at 5,03%, making 2019, in terms of profitability , in the best first quarter of the historical series. But it will not always be the same since this is a very uneven product in its quarterly results. With very important differences from one quarter to another of the year. For this reason, investment funds should not be focused on very short periods. If not, on the contrary, it is very convenient to direct them to the medium and especially long term. So that in this way, the estimated returns can be achieved by national and international management companies. Beyond other technical considerations that will be the subject of other articles.