In social networks you can find countless people who request guidance on investments, and there are even those who, being new investors, ask for help in forums or Facebook groups on how to build a portfolio, but many times the answers can be even more confusing.
People start recommending random schemes and even discussing active versus passive investing and as a consequence, people who intend to get their doubts resolved or find the right answer end up with more doubts.
A lot of investors, especially new ones, rely on various sites, blogs, and forums or groups to make investment decisions. If you depend completely on them to make decisions about an investment portfolio and its revisions in corrective markets, it is possible that you are falling into a series of errors that are detrimental to the invested capital.
One of the problems of these forums or groups lies in the handling of questions. Most of the time the questions are incomplete. New investors never offer complete information. They do not know the crucial factors about financial details such as objectives, investment horizon, risk profile, etc. And if you want to further complicate the issue, you should know that there are, in Mexico alone, more than 6,000 different investment fund options on the market.
A simple question like what is the best investment fund? It makes perfect sense to a new investor, but even an expert would have a hard time answering this question without the necessary context.
As a new investor you have to do your homework. It is necessary to begin to become familiar with the financial language, to know and be clear about the investment objectives in order to determine the risk profile that can be assumed, but, above all, go to a specialized advisor to receive adequate guidance.
It sounds complicated, but it is not. In short, it is nothing more than a series of questions regarding your personal financial situation and your goals, which will make it easier for you to know where to invest your money and to make a selection of products according to each of your needs.
Here are some basic concepts and their application so that you can start investing:
- Investment horizon. It is the time for which an investor plans to leave his money invested. And certain questions will have to be asked, such as: Are you planning to buy a home? Are you looking to invest for your children’s studies or plan your retirement?
- Liquidity. It refers to the time in which the investment becomes available money. It is necessary to verify the liquidity of the selection of investments for the disposal of resources in case of any eventuality.
- Investment amount. There are investment options that allow you to participate from $50.00 (Fifty pesos MN), so the starting amount is not an excuse. You can invest today with a small amount and gradually increase it.
- Debt Funds. They invest their capital in debt securities (public debt) issued by the federal government, such as cetes, bonds or private debt from banks or companies. In other words, they invest in assets that have an assured interest. These types of funds generally have low risk and low volatility.
- Variable Income Funds (RV). These investment funds invest in shares of companies listed on the Mexican Stock Exchange (BMV). In other words, they invest in assets that do not guarantee the return of the investment, since the level of risk and volatility must be faced.
Now more than ever, making the decision to save is an important step toward better financial health. However, it is necessary to know and analyze investment alternatives to put money to work and get the most out of it.
*The author is Vice President Product & Client Servicing at BBVA Asset Management.