Have a savings, coming from extra income such as the bonus, is clearly an opportunity, of what? To invest that money wisely to grow personal wealth going forward.
In this report we present four investment ideas to be able to allocate your bonus in the most appropriate way according to your risk profile:
- MEP dollar.
- Investments that are adjusted for inflation.
- A portfolio with a mix of inflation and dollar.
- A portfolio 100% made up of CEDEARs for investors with an aggressive risk profile.
As we mentioned before, these alternatives are listed in an increasing order of risk predisposition on the part of the investor.
For more detail, let’s advance in the explanation of each one of them.
MEP dollar (plus mutual funds)
In a context of high inflation like the current one in Argentina, the prevailing logic is that at some point the dollar should jump to accommodate its valuation.
In the first four months of the year, inflation in the country accumulated an increase of 23.1% according to INDEC estimates. Meanwhile, the free financial dollar – the one that is traded on the capital market – advanced just 5% (until 5/26/2022).
Under this logic, many investors think that it is the right time to dollarize their monetary surpluses in pesos. This is not a bad alternative, although it should be just the first step in the investment process. Why? Because the world today is sailing with an inflation of 7% per year.
If one buys dollars and leaves them idle, those bills will lose purchasing power over time.
Thus, the first step should be to make the dollars starting from pesos. This can be carried out in the Inviu app with a simple functionality to execute: MEP Dollar in one click.
Once you have the dollars, you have to invest them. From our app we have alternatives to carry it forward, such as the mutual funds Compass Best Ideas or Megainver Fixed Income Dollars, which have a portfolio made up of the negotiable obligations of lower-risk companies.
It is a way for those dollars to obtain a return capable of combating global inflation.
Instruments that adjust for inflation
The jump in inflation at the beginning of the year generates serious concern. Private analysts estimate that the rise in the general level of prices will be close to 65% in 2022.
From there, the pesos in your pocket lose purchasing power rapidly.
If the idea is to maintain the purchasing power of that money over time, there is an urgent need to invest it. The supply of instruments that adjust for inflation is highly biased towards the public sector. Today, more than 80% of the instruments that adjust for the cost of living belong to the public sector.
In addition to this non-minor risk, a second conditionality also arises: the shorter-term bonds, which have the indexation clause, yield negative. This is that its expected return is a couple of percentage points less than the inflation that is estimated to close the year 2022. Thus, the task becomes more difficult.
Our view in this regard is that the best way to meet these challenges is by investing in mutual funds that aim to match or beat the rise in the general price level. They do this by investing in a diversified manner in instruments with different terms to optimize the return on investment.
For us, as investors, it provides us with access to a diversified portfolio with an investment amount that can start at $1,000 and up.
The offer of mutual fund managers found in Inviu is varied and wide, such as Delta Asset Management, Compass, Galileo, FIMA, among others.
More specifically in the products that adjust by CER, today the Megainver Absolute Return mutual fund is one of the most popular.
Mix inflation and dollar
If the investor’s position is not so clear as to what they want as an investment objective, with an internal struggle between the desire to dollarize and the bias towards maintaining purchasing power, a combination of both could be a good strategy.
Thus, a mix of the mutual funds that we indicated in the two previous options could be attractive:
- Compass Best Ideas (USD)
- Megainver Fixed Income (USD)
- Megainver Absolute Return (AR$)
Additionally, if your risk tolerance is higher, you could combine your strategy with investing in a CEDEAR of a high-quality and potential company, such as Alphabet (GOOG) or Meta Platforms (FB).
The more than double-digit decline in Wall Street stocks may open up opportunities for investors looking for solid, big-name companies with the intention of holding them for the long term.
The CEDEARs are instruments that are traded in our market in pesos and that allow exposure to international companies away from the Argentine risk.
If we are talking about CEDEARs, let’s move on to the next investment idea.
100% CEDEARs portfolio
For investors with an aggressive risk profile who wish to expose themselves from Argentina to international assets, we have designed an investment portfolio 100% made up of CEDEARs.
Although it is true that investments of these characteristics distance us from the risks related to the domestic macroeconomy, we must also consider that it is a portfolio that is entirely made up of shares, leading to a higher risk than the average investment.
Hence the character that it is a strategy suitable for more aggressive profiles in terms of risk tolerance.
The good news is that the CEDEARs market has evolved very constructively over the last few years in terms of the supply of assets and liquidity that they have. In addition, as of January of this year, the possibility of operating CEDEARs of ETFs was introduced as a novelty, which are funds made up of several assets and that replicate an index, economic sector, commodity or other underlying asset.
Considering the above, a portfolio that we consider attractive is the following:
Coca-Cola (KO) + Wal-Mart (WMT) | Low Beta: These two positions are intended as an anchor to volatility in a portfolio where there will be many tech players. Both Coca-Cola (KO) and WalMart (WMT) are the largest volume CEDEARs within the spectrum of liquid assets in the local market.
Berkshire Hathaway (BRK-B) | Low volatility: the holding company of renowned investor Warren Buffett has solid fundamentals, with an impeccable track record in different market stages. With it we add diversification, maintaining liquidity and reducing volatility. The top 4 of the holding company are Apple, Bank of America, American Express and Coca-Cola.
Facebook (FB) | Meta-competition: the company showed inauspicious guidance due to increased competition. However, at these price levels it shows interesting ratios, so we maintain our historical position. With an estimated P/E ratio for 2023 of 12.3x, it looks cheaper than other companies in the technology sector.
Microsoft (MSFT) | Anchor with the S&P 500: we entered Microsoft, in addition to being a
solid company, as part of the benchmarking strategy of the S&P 500 considering its high weighting within the index.
Financial Select Sector SPDR Fund (XLF) | Rate hike: we take a position with the aim of taking advantage of the financial sector, one of the sectors that can present the best relative performance in the context of interest rate hikes such as the one proposed by the Fed in the face of strong inflationary pressures such as the ones we are showing.
Lockheed Martin Corporation (LMT) | Armed conflicts: in the context of marked arms tensions between the West and the East, and in our search for CEDEARs that have a minimum of liquidity, we consider it a strategy to take a position in an industry company in the face of geopolitical tensions.
iShares Russell 2000 ETF (IWM) | Small Caps: The iShares Russell 2000 ETF seeks to track the investment results of an index composed of small-cap US equities.
All these alternatives are operated from our app with your open client account. The recommended amount to invest in these assets is $100,000 and up.
Head of Research and Strategy at Inviu
Source: Ambito
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