The improvement of the economic situation, together with the lack of profitability in other investments, as before was the fixed terms, have made the current trend, of the first quarter of 2017, has confirmed the annual increase that the investment funds as a product of Spanish collective investment , with a sustained growth between 2% and 3%. This consolidates investment funds, as one of the products that attract the most investments.
This circumstance has generated the appearance of numerous options that often combine the profile of your average investor – moderated, conservative or aggressive – with the type of asset that predominates in the fund. These assets can be equities, monetary, fixed, or mixed-income, etc.
Due to the full range of investment funds, finding the best ones can be complicated and depends on many factors.
MAY I KNOW WHICH FUNDS ARE SUITABLE FOR MY INVESTOR PROFILE?
There is no direct answer to this question since that depends on many factors such as the risk profile that I as an investor have, how long I have to recover the investment, if I have financial knowledge or if I delegate to my trust manager, but Fortunately, it is possible to follow a series of guidelines that help me select the best option at any time:
- Perform continuous monitoring of various investment funds, short and long term, to gather information and answer some of these questions.
- Knowing the results of the past of some funds can give us clues, but we cannot base our decisions on them since, as the publicity of the funds says, “past results, they do not guarantee future returns.” Although past performance does not guarantee the future, it is an excellent tool to discover the most profitable investment funds of the moment, as well as to capture those products of the upward market – for example, raw materials, bonds or investments in emerging countries, etc. – and track, before making the decision to invest and how to diversify capital.
- Likewise, other indices can also be used to compare investment funds, such as the benchmark of the fund or the evolution of similar market products, to obtain an overview.
- Know the independence or not of the investment fund recommender. This is the best means to ensure that the objectives of the client and the seller follow the same line.
- On the other hand, investment funds have a volatility index, which is a summary of the fund’s behavior over time and the oscillations it may have suffered. Rankings often use volatility, among other factors, to determine the level of risk of the funds.
To the type of investment fund, there are other factors that we describe below:
- The estimated investment term.
- The personal circumstances of the investor.
- Your knowledge
- And his risk aversion.
It is no less important to know, in a personal capacity, the forecast of need for liquidity (most funds have daily cash, but others do not) and the taxation of the funds.
In a way, each investor risk profile can find in the market at least one investment fund that exactly matches their needs.
In parallel, that is where the key lies in choosing one of the best investment fund management entities, taking into account aspects such as their professionalism, their trajectory, and their understanding of the market.
THE SELECTION OF THE MANAGING ENTITY, FUNDAMENTAL WHEN INVESTING
In the same way as the portfolio of an investment fund, the managing entities are also governed by an annual rate of return, expressed as a percentage. This may be a point to consider, although it is equally important to assess:
- What types of investment funds they manage.
- The sector to which they belong.
- The profitability of them (short term or up to three years).
- It is volatility.
- Or the behavior of your funds, among others.
Of course, management comes at a price: the commissions of the managers. In some cases, its weight can determine a decision, especially in those cases of low profitability. Many of the current funds have more than one kind of participation and establish a scale of commissions based on the capital invested, which, as a general rule, the more investment, the less commission percentage.
Some products with higher risk and volatility, such as the stock market, establish commissions that can be around 2%. In the case of guaranteed funds, there may be additional commissions, such as subscription, opening, and repayment.
Finally, when selecting an investment fund management entity , it should be taken into account whether acquiring its services implies passive management – that is, the managing existence is limited to those funds that replicate an index – or an active control, very different and with a manager who personally is responsible for selecting the assets of the fund, the amounts of capital and movements.
Inactive management is where the investment philosophy comes into play -at the upside, “focuses on the value” between gestures-, the long – term vision, the process of analyzing funds and objective assessment, by each entity and of the professionals that work in managing the investment portfolio of its clients.
On many occasions, a relationship of trust is established with a said manager, and their portfolios become almost personal, “author” funds.