Investment funds are one of the products chosen by users to channel their savings effectively. They have replaced fixed-term bank deposits, whose returns have declined to the point of offering no more than 0,5% in recent months. In this respect, funds have convinced small and medium-sized investors to try to make their available capital grow, surpassing other financial products that are more complex in structure and mechanics. They have even attracted the savings of a significant portion of these individuals.
Under this general premise, one of the challenges with investment funds is the wide range of models they offer. They come not only from equity markets but also from fixed-income markets and even from alternative or money market formats . This allows investors to improve their positions in the financial markets from this point forward. Based on these different formats, we will offer readers the best strategies for choosing the most suitable investment funds.
In any case, this decision will depend on the profile of small and medium-sized investors . That is, whether they are aggressive, moderate, or intermediate, so that the product can be tailored to their actual needs at the time of contracting this financial product. Similarly, the amount of money they will allocate to these types of transactions will depend on their individual characteristics as users. The goal is to improve the profitability currently offered by these investment products and, if possible, to approach the returns currently offered by buying and selling shares on the stock exchange.
Choosing funds: type of markets
The first aspect users should consider is the market they wish to target going forward. That is, whether it's the domestic market or those from abroad, which will ultimately determine the actual profitability of the chosen investment funds. Furthermore, it's highly advisable to monitor the performance of the financial markets you're keeping an eye on. In this regard, it's crucial that the type of market you choose is based on its current trend and in proportion to its profitability.
On the other hand, domestic equities should always be included in investment fund portfolios. This is not only because they are more widely known financial assets, but also because they offer the most competitive fees. You can save up to 30% on many of the funds offered by asset managers. Furthermore, don't forget that a small portion of your savings can be allocated to emerging markets. This is because they can generate higher returns if they show a sustained upward trend.
Depending on the currency
The currencies of investment funds are very important because they can be a factor in improving the interest rates offered by these types of financial products. A key difference is that less knowledge of the transactions is required, as this stems from investing in a market index with no currency risk —that is, one whose currency is the euro, such as the Eurostoxx 50—and also because it involves companies that are well-established in the European business landscape.
The minimum investment to enter these funds depends on the characteristics of each of them, but currently there are products that can be subscribed from only 100 euros, although for the investment to produce the desired effects in terms of the perceived profitability it is necessary to deposit in around 3.000 euros at least. The closest funds being the ones that mostly pick up this trend. With the advantage that we are not going to assume unnecessary risks that can weigh us down on the operation at some point in your hiring. As with investment funds subscribed in dollars, Swiss francs or Norwegian crowns, to name some of the most relevant and well-known currencies.
Accumulated profitability
This should be another parameter we consider when choosing this investment model. However, it's important to understand that past performance isn't guaranteed to be the same in the coming months. Rather, it should serve as a guide to illustrate the true state of the investment. In fact, there are often significant fluctuations from year to year , as can be seen in historical data. Nevertheless, it's always wise to review this information before finalizing the investment fund to understand its potential performance after the fund is established.
While on the other hand, there are many factors on which the profitability of this financial product will ultimately depend. As for example, the conjunctural moment of the international economy, the events that develop during the year or the evolution of the equity markets around the world. In any case, this is a piece of information that must be consulted in the fund's brochures and which are available to all users. Both with regard to national products and those from outside our borders, which may present notable differences in one or another fund of the same category.
Opt for the best assets
It goes without saying that another key factor to consider from this point forward is the trend of the investment funds themselves. And within that, the focus should be on subscribing to those funds that are currently performing best . In some cases, this might be US equities, and in others, for example, commodities. Each situation requires a different approach, resulting in a fund portfolio that can vary substantially, regardless of the profile of small and medium-sized savers. Because ultimately, the goal is to maximize and optimize the available investment capital.
However, it is true that there are other models that are aimed at the medium and especially long term that are governed by other financial constants and not only the moment their financial assets go through. This is one of the aspects that must be anticipated before your subscription to avoid unwanted situations from this kind of approach. Not surprisingly, one of the aspects that you should avoid at all costs is to subscribe investment funds without prior information and that may lead you to have some other negative surprises from the next few months, as they are happening to them. to a good number of small and medium savers.
On the other hand, it is also very useful to let yourself be advised by those responsible for investment in the entity where you are going to formalize this financial product. It is a service that is free and can bring you more than one benefit to improve your profitability. As well as not to make a wrong decision that you may regret later and that is another of the functions that investors have. Any mistake in the calculation can cost many euros in the balance of the operation.
Profitability in each of the funds
International equity funds saw growth of 3,1% in the month, representing an increase of over €1.140 billion in absolute terms , according to the latest data from the Spanish Association of Collective Investment Institutions and Pension Funds (Inverco). The data also highlights that, year-to-date, international equity funds experienced the strongest growth of all categories in percentage terms (almost 29%), which translates to an increase of €8.540 billion in absolute terms. Mixed fixed-income funds registered very positive net inflows, which, combined with market appreciation, allowed this category to increase its asset volume by 1,4% compared to the previous month (€570 million more than in November).
In this way, mixed fixed income funds have recovered the assets lost in the first part of last year, with an increase of around 2%. Likewise, mixed equity funds, that is, with an exposure to stocks in their portfolio of between 30% and 75% of the total, show high growth in the month, and are only behind equity funds. international in terms of percentage growth in the year (21,3% more than in December 2019), not counting fixed income, whose increase was partially due to the new classification of some monetary funds as short-term fixed income.