In certain or uncertain times, it is always important to know where to invest your money and use different instruments to limit your risk. Because when you are an investor you must be very clear that every investment carries risk. Have you been offered investments without risk? Well, they lie. All, all investments always have some risk. What’s more, tell me the investment and I’ll tell you the risk.
Here I leave you some options to diversify your portfolio and I clarify the main risks.
Tools where you can invest your money
CETES
They are bonds that the government issues that are related to Banxico’s reference rate. There are different terms, and you could expect to get around 8% per annum on this instrument today. It is quite safe because it would imply that the Mexican government would stop paying.
Main risks
Yes, there is a small risk that the government will not pay, although it is a small (but not zero) risk. But you also have the risk that the peso depreciates against other currencies, and that the 8% to which you are subject to loses purchasing power. You also have the risk that Banxico’s rate continues to rise, that with them the yields of the new CETES rise, and that then the value of your bond is substantially reduced. For example, if you buy CETES at 8% and in 1 year there are CETES on the market at 20%, clearly your bond will have less value. Why would someone buy your bond at the price you paid with a yield of 8% when there is a CETES market at 20%?
CROWDFUNDING
They are investments in the projects that the companies of crowdfunding, or crowdfunding, issue. There are several types here: equity crowdfunding (where you participate as a shareholder in the project), debt (where you get an interest), royalty (where you get, as you’ll notice, royalties), and there may be some combined. It is important to validate that the company in which you are invested is regulated (it is an IFC, Collective Financing Institution, authorized by the CNBV). Generally the yields offered by these companies are higher. An example is the IFC that I lead, which has historically granted returns of 12.45% per year and more than 16% on projects offered in 2021.
Main risks
Here you run the risk that the project or projects in which you invest through the IFC will not pay you. You generally have the option to diversify across multiple projects, which can also limit your risk. It is important to mention that investments through IFCs are not guaranteed by the IFC or by the government. There is also a liquidity risk; that is to say, that the investments or projects in which you invested do not pay in the expected time and you cannot then withdraw your investment until this happens.
REAL ESTATE
You can invest in buying a house or property to use it or to rent it. These goods have the perception of being very safe investments, because nobody is going to remove the partitions, right? If you have doubts about whether to obtain a mortgage loan at this time due to the escalation of rates, I would argue that a higher loan rate is possibly a better time if you can obtain a lower price on the real estate for it (which usually happens because the high rates decrease demand). Sure, as long as you can get a fixed rate. Finally, remember that when rates go down again, you can always refinance at a lower rate, but you will no longer be able to renegotiate the price of the real estate once the deal is closed.
Main risks
If you pre-purchase, you may run the risk of the developer not finishing the property on time, finishing it to other specifications than promised, or even not finishing it at all. Even if it is not a “robust” developer, it could request a credit for the construction with the guarantee of the land and/or construction itself, and that it be this lender who finally keeps your house/apartment, even if you have already paid 100%. of what you agreed (that’s why pre-sale is cheaper, because it’s not just a matter of value over time, but a higher risk). Even if you don’t buy in pre-sale, there is a risk that the property has hidden defects, that the area where you bought it will drop in value (perhaps a sinkhole will open due to an earthquake), or that the income you had projected will not be what you expected. . Finally, if you buy on credit, you could lose the good and what you have paid, especially if your credit is at a variable rate and the reference of said rate rises uncontrollably.
SHARES (EQUITIES)
They are investments in the capital of public companies. You are literally buying shares and becoming the owner of a small percentage of the company. These investments are also not guaranteed and depending on the stock, can be very volatile. If you are new to this type of investment, perhaps you can start by opening an account at a brokerage house and investing in one of their funds or in an ETF (Exchange Traded Fund), which contains a collection of shares chosen by experts so that you do not you have to select one by one and thus increase your risk.
Main risks
Your investment may lose value and the share price may fall. Even if the company goes bankrupt, you could lose all your money. Remember that, in a bankruptcy event, common stockholders are the last to get any kind of salvage value if the company is sold piecemeal. This priority, or order of payment, generally allows these investments to have very good returns, but also increases the risk considerably in the event of bankruptcy.
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