In the market, there is a large catalog of investment funds. Before deciding on one or the other, you should ask yourself these three questions: how much money are you willing to invest, for how long and how much risk are you willing to assume. With these three variables in hand, you will know your investor profile.
Below you will find the most important points that you have to take into account:
1. Find the background that best suits your profile
If you are already clear about your investor profile, you can start looking for the fund that best fits your profile.
The next step is to know the characteristics of the fund that interests you. You will find this information in the information brochure of the fund, which defines the investment policy or vocation of the fund, which establishes in what type of assets the fund invests (fixed income, variable income, mixed-income, guaranteed …). In addition, in the brochure, you will find other information such as the risk scale and the commissions associated with the fund.
Another variable that you must take into account is the historical profitability of the fund. When comparing the historical returns of various funds, we must always do so among funds that have the same investment policy, that is, funds that invest in the same assets. In addition, it is worth remembering that past performance does not guarantee future returns.
Now, how to look for investment funds? Currently, there are very useful tools to find that or those funds that best suit your needs.
2. When hiring
Once you are clear about the fund that is best for you, you can contract it through a fund trading entity. You can do this by going to a bank office or online. This last option is faster since in a few steps we can formalize the investment. We must bear in mind that to be able to proceed to the hiring of the fund before you have to be a client of the bank.
It is important to read the investment fund’s prospectus, among others, to know the investment policy of the fund as well as the commissions associated with it. It is also convenient to know the taxation to which the investment funds are subject.
3. Watch your investment
Once you have invested in one or several investment funds, you must be attentive and monitor your investment continuously. This does not mean that you should check the evolution of the fund on a daily basis, but on a monthly or quarterly basis, you should be aware of the fund’s progress. This monitoring work hardly requires any effort, since, on a regular, quarterly or semi-annual basis, the fund manager prepares reports on the evolution of the fund.
It is worth highlighting the advantage of having a disciplined savings plan. This is nothing more than making contributions to investment funds on a regular and non-sporadic basis. It is a simple way to reduce the uncertainty about what is the best time to save. Short-term market fluctuations can play in your favor since entering different moments of time at different prices softens the market effect (ups and downs). In addition, being disciplined in periodic savings, the economic effort is much more bearable. Therefore, periodic saving is a much easier, more efficient and easier way to achieve our economic goal in the future. By investing small amounts on a regular basis, you will see these savings grow over the years.
Finally, it should be noted that it is always interesting to deposit our savings in more than one investment fund since diversification reduces the risk of losing money in the event that a fund does not work well.