One of the options available to investors this year is investing in investment funds. However, the difficulty lies in the sheer number and diversity of these financial products, ranging from equity and fixed-income derivatives to alternative investment options. In any case, and within this context, investment funds registered a positive return of 0,77% , bringing their cumulative return to 6,5% for the first eleven months of the year—a record high for the period up to November of last year.
One of the keys to avoiding mistakes in this type of investment is diversification. This is one of the best ways for small and medium-sized investors to protect their invested capital in the face of undesirable scenarios that may arise this year. In other words, it's about not putting all your money into a single portfolio, but rather distributing it across different portfolios curated by investment managers.
Furthermore, it can be a highly effective investment strategy for improving the intermediation margins offered by these financial products. The percentages will depend on the profile of the retail investors: aggressive, intermediate, or conservative. This allows for the creation of substantially different model portfolios that can generate very different returns. In any case, the chosen financial assets do not have to come from the same sector. They must come from investment sectors that are clearly differentiated from their inception.
Diversify by geographical areas
First, it's advisable not to choose the same geographical areas for each of the investment funds or financial assets that make up the portfolio from this point forward. You should select those with the best trend so that your money can appreciate from the moment you subscribe to their securities. Furthermore, it's very important to emphasize this aspect, as it's very useful for implementing a much safer investment strategy than before, and it can help you preserve your savings above other types of technical considerations.
Within this stock market approach, it's equally true that from this point forward, holdings in European and US financial markets are essential. These will be central to our investment strategy and will be complemented by a small allocation to the best-performing funds in emerging financial markets. For example, this could include funds from India, China , or even, for those with a higher risk tolerance, Russia. These markets offer significantly greater potential for appreciation than more traditional stock exchanges, although they will experience substantial corrections due to their intensity.
Combine fixed income with variable income
One of the keys to the success of our investments in products of this type lies in a very prudent mix of both financial assets. The proportion should be tailored to our profile as small and medium-sized investors and will certainly determine the final outcome of the transaction , for better or for worse. However, these assets should not be absent from our investment fund movements in the coming months. They must be thoroughly analyzed to minimize errors in our fund selection.
But you don't have to limit yourself to these major financial assets. If not, on the contrary, you can also opt for other monetary products or even alternative investment models. Under proportions that are already established by the managers that are in charge of marketing these financial products. Not only can they be more profitable from now on, but they can better adjust to the worst scenarios in the equity markets. With results that can surprise you with great attention.
Developed under active management
There is no doubt that active management can become one of the best investment strategies you have to diversify the invested capital. Because it can help you to solve the most unfavorable scenarios for the financial markets and where you can even make the money profitable with some solvency in the open movements in investment funds. While on the other hand, it is no less true that this investment system is constituted at this time as a way to
Under the active management system you have the great advantage that you can adapt to all the scenarios that can be created or generated. In this way, the portfolio of financial assets can be adapted according to the economic variables that develop over the years. Without you having to do anything yourself since it will be the manager herself who is in charge of modifying the investment portfolio. This operation is carried out from time to time and with changes that can affect practically half of the investment funds. Whatever financial assets these financial products are made of.
Portfolio composition
In some cases, these portfolios usually incorporate monetary funds as an element to preserve savings in the most delicate moments for the equity markets. Like a small alternative component to take advantage of the favorable trend of some financial assets. Although in a minority way because this is a riskier option than the rest and for this reason there is not too much exposure in their positions. While on the other hand, another financial asset that these investment products usually incorporate is public debt based on certain geographic areas that can add value to the investment of these funds.
It must also be emphasized that there are no limits to include in these models, only those that the management companies consider favorable, both national and outside our borders. Where in each moment it can be a different one as you have seen in the last formats that you have subscribed in recent years. From this perspective, it is true that you have many models to choose from and direct them to a period of permanence that is recommended between 3 and 7 years approximately. So that in this way, you can design an investment strategy that is successful and you are in a position to create a more or less stable savings exchange for the next few years that lie ahead. Depending on the characteristics that you contribute from the beginning since it is at the end of the day what it is about.
Evolution of funds
Investment funds experienced growth of €2.105 billion, bringing their total assets to €273.429 billion, a 6,2% increase , according to the Spanish Association of Collective Investment Institutions and Pension Funds (Inverco). Investment funds have accumulated an increase in assets of €15.915 billion. Once again, the markets actively contributed to the growth of investment funds during this period, maintaining the positive trend of the previous month.
In fact, the positive evolution of the equity markets has generated a reduction in risk aversion among participants, who have demanded Funds with high exposure to the stock market during the month. This, together with the growth in the value of the portfolios due to the market effect, has allowed the categories with exposure to shares to present growth of great magnitude in some cases.
By category of funds
Thus, International Equity Funds showed growth exceeding 5% in percentage terms for the month, and more than €1.839 billion in absolute terms. In the first eleven months of the year, International Equity Funds experienced the highest percentage growth of all categories (25%). This represents an additional €7.400 billion in assets exposed to International Equities (in some form). Mixed Fixed Income Funds also registered positive net inflows , which, combined with market appreciation, allowed this category to increase its asset volume by 2,5% compared to the previous month (€948 million more than in October).
Likewise, Mixed Equity Funds, that is, with a high exposure to stocks in their portfolio (between 30% and 75% of the total), show high growth in the month, and are only behind those of International Variable Income in terms of percentage growth in the year (19,8% more than in December 2018). On the contrary, Fixed Income Funds, Guaranteed Funds and those with an objective of non-guaranteed profitability experienced decreases in net worth in November that together exceeded 1.600 million euros.