Investments in volatile times: what is the best investment term?

Investments in volatile times: what is the best investment term?

In a complex and volatile moment like the one Argentina is currently going through, it is very important to have a solid investment planadapted to our needs and the circumstances we are going through.

Economic and political uncertainty can make investors uneasy, but it also opens up opportunities for those who are well-informed and prepared.

The first step to building an effective investment plan is to evaluate our profile as an investor. Are we conservative, moderate or aggressive? This assessment of our personal characteristics will help us determine the appropriate mix of assets in our portfolio.

Conservative investors tend to opt for lower risk assets, such as fixed income instruments with good credit quality or fixed income mutual funds, while The most risky ones may lean towards variable income instruments such as local shares or CEDEARs.

Risk tolerance is one of the most important factors to consider when defining an investment profile since risk tolerance indicates a person’s willingness to assume potential monetary losses.

Once we know our profile investment, it is time to define the capital we are willing to invest. It is essential to establish an amount that does not compromise our short-term financial stability, but that allows us to achieve our defined objectives.

In this sense, it is necessary to take into account that diversification is a key point when forming our investment portfolio. This remains a good strategy since, by spreading investments across various instruments, sectors and asset classes, you can mitigate risk and reduce exposure to the volatility that is inherent to a single asset. This point, specifically, is part of the “ABC” of any financial strategy.

Speaking of objectives, it is important to be clear about what we want to achieve with our investments. Are we saving for retirement or a retirement plan, to buy a home in the future or to finance our children’s education? Each of these goals will require a different investment strategy, so it is essential that you dedicate the time necessary to define them precisely.

Now, in addition to the objective, it is essential to establish a investment term. Which ones exist?

Generally, they can be divided into three large groups: the short term, which refers to days or at most a month (especially in scenarios like the current one); he medium term which could be closer to six or eight months; and finally, the long term which is when the investment is proposed for more than one year. Although again, the sensitivity of what can be understood as short, medium or long can depend a lot on the situation being experienced.

In turn, each time horizon brings with it a particular set of risks and opportunities. For example, for short-term investors there are low-risk investment options – that is, for conservative profiles – such as Money Market Mutual Funds, or stock market bonds.

Both serve to generate interest in a short period of time with practically no risk, and a key piece of information: without the need to leave the pesos “immobilized” as would happen in a traditional bank fixed term.

On the other hand, investors long term, They generally aim for gradual growth of the asset over time. Here you can think of a portfolio (with a certain selectivity) of shares, which, although in the short term they tend to be an investment with high volatility, the possibility of not needing to sell them quickly and holding them over time is historically a good option. option to increase wealth.

Once we have defined our investment profile, capital, objectives, term and risk, it is time to select the appropriate investments.

In the market, there is a wide range of options available, from stocks and bonds to Mutual funds segmented by strategy.

It is important to research and understand each option before making a decision. Consulting with a financial advisor can be of great help in designing a portfolio that fits our needs and risk tolerance.

Digital Banking Team Leader.

Source: Ambito

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