By Antonio Cevallos
Director of the Mutual Funds Association
General Manager at BBVA ASSET MANAGEMENT
It is one of the most common questions among those who seek to grow their money. However, waiting for a universal response could be a mistake. The key is at the previous work that each investor, together with their advisor must make to understand their situation, goals and risk tolerance.
The first step is to know why it is being invested. The goals will be the compass that guides decisions. Some of the most common goals are saving for the initial fee of a house, paying in the future the University of the children or building a long -term retirement fund.
As a second step, the investment horizon must be established. Define if the objective is short, medium or long term: normally short term is defined as investments of less than a year, medium for deadlines of 12 to 36 months and long for those investments that are made more than 3 years. This horizon will influence the strategies and assets to choose. For example, a short -term goal may require more liquid and safe investments (cash), while a long -term one allows to assume greater risks to seek better yields, such as actions.
Third, the risk profile must be known. Each investor has a different tolerance to risk. It can be simplified in three types of profile: conservative is one that prefers stability on great yields. A moderate profile is one that accepts a certain risk to balance profitability and security and an aggressive is one that seeks high yields and is willing to withstand volatility.
As a fourth step, a diversified portfolio is built based on the information collected in the previous steps. For example, a moderate diversified portfolio could contain 50% for fixed income, 30% for variable income and 20% in high liquidity instruments (cash). Diversification helps reduce risks and maximize performance opportunities.
Finally, and as the last step the appropriate mutual funds are chosen to build said portfolio. In this step it is important to choose an institution with good reputation and support in the market.
Investing successfully requires order, discipline and a clear methodology. No step should be ignored and, if necessary, consult an expert. Informed decisions not only protect your money, but also increase your chances of reaching your financial goals. Investing is more than choosing a background; It is to build a plan that reflects your goals, needs and ability to assume risks.
