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Investment Funds or ETFs

Investment opportunities are there, as they have always been, in the market where uncertainty and instability are present all the time.

Those who invest in stocks have long felt the weight of this instability and needed a lot of cold blood to make the right decisions at the right times.

Even if you invest in investment funds, you may even be smiling now, but less than 3 years ago you would have your hands on your head when experiencing such devaluation. It is true that all funds have been devalued and not all actions have lost ground. In economies there are cycles and countercycles, some follow the trend others are contrary to the trend. This is understandable.

However, right now, when you go to bank to make a savings or build an investment plan, you will be approached with a panoply of more or less complex and eye-catching financial products.

This product is easily presented to the customer as a product with potential. There is indeed potential, but will it be worth it?

Do not subscribe to what you do not understand

Do not subscribe to what you do not understand

Okay, you know what national stock fund means, but you know what an investment fund is. More specifically, you will know everything about the national stock fund that you are presenting. It knows the costs, the investment policy, the historical profitability, among others.

Most of the time, an investment fund subscribes knowing only its historical profitability and within a very short historical period. See the following example of national equity investment funds on a given date:

Now See Historical Profitability at a Given Moment

Now See Historical Profitability at a Given Moment

As you can see the picture is completely different in historical terms, which means that careful monitoring is key in this type of products. So, I ask, do all bank customers track the profitability of their investment funds?

Evaluate Deadlines

Evaluate Deadlines

There are mutual funds for all tastes and all deadlines. National equity funds are medium-term funds, for example investments between 2 and 6 years. Applying your money once in the fund may mean loss of future profitability, because the fund may not appreciate what it is intended to and even depreciate.

The concept in this type of financial products is the same as the stock, purchases and sales are made according to the evolution of the market. After all they act in the market.

But other funds are presented to clients with similar or quite different characteristics. The rule is the same, I am comfortable with the risk, I recognize that past returns are not a guarantee of future returns, I know the recommended investment term, among others.

Simplify

Simplify

I have always advocated ETF or Exchange Trade Funds as trackers as they track the evolution of a certain index.

For example, if you do not understand the national equity fund very well, or do not fully trust the Fund Manager’s effectiveness, then an ETF on the PSI 20 Index may be the ideal solution for your money.

There will be no long-term investment fund that exceeds the market.

Now See Historical Profitability at a Given Moment

ETF PSI20 TR ETF that replicates the PSI 20, see the figures, considering that the ETF had a start date in August 2010, two years of activity :

As you can see, equity funds have a better performance than the ETF, however, it has to be considered that the ETF began in the midst of the economic and financial crisis, where markets have reacted negatively to the various adjustment programs. Its first year of activity had a significant deviation from the benchmark since it started in August 2010. However, in the second year, it is still closely following the Benchmark and, the aim is replication, will be in the future.

Going back to the statement accepted by all investors, there will be no active investment management that will hit the market / benchmark in the long run.

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