In times of inflation, investing so that savings do not depreciate is an alternative, but some basic rules must be followed: do not use the money needed in the short term, diversify and set priorities and seek advice if possible. professionals are safe.
Investing is not an easy task, but it shouldn’t be intimidating either. The first thing that is recommended is to analyze the real situation to check whether we can allocate a part of the income to provide for the future in general. home, etc. Because depending on the objectives to be achieved, strategies will need to be defined in each case.
Although it is clear that any investment what is undertaken has an implicit risk, even if it is very low. It is important to keep in mind that the higher the expected return, the higher the risk and, of course, the higher the probability of taking losses. As suggested by Fundación MAPFRE: “you need to protect your legacy Against inflation” It is important to consider the increase in the prices of products and services, as it greatly affects the possible investments to be made in a certain period. As a general rule, if you have some savings in the bank and they do not yield returns, you lose your purchasing power because you can buy less with the same money.
profitable investments
There is no single measure of what is a good investment. A 5% return on a one-year investment may be very good, but not enough for a 10-year investment. That’s why time is so important when investing.
To seek the minimum required, this would exceed the inflation figure. Inflation directly affects savings and investment by extracting value from money and benefits investment.
For example, if you get a 1% nominal return on money and inflation is 4%, you actually lose 3% in real terms.
adapted
A general recommendation is to invest in what you don’t need or are prepared to lose. The truth is that every investment involves risk (you may lose some, rarely all, of the money). On the other hand, it serves as a general framework about the amount to be invested.
The trick is to find out how much money you don’t need. It is recommended to have a money bed encountering unforeseen expenses and having a certain financial stability in times of market downturn (which will happen).
And how much money are we talking about? Three to six months of fixed expenses or income if you want to be safer. That is, if the monthly fixed expenses are 1,500 euros, you need to save around 4,500 to 9,000 euros before you start investing.
Advantage
Always having a financial cushion will help:
-
Face unforeseen expenses without having to stop your investment plan.
-
Deal with unplanned spending in times of stock market crashes without having to dispose of them.
-
Regardless, you can be sure that money is available as room for maneuver. That’s why it’s important to keep this emergency fund in a safe and liquid product. In other words, a product that will not lose value beyond inflation and that you can easily access when necessary.
-
The amount of this bed, which is part of the non-investment assets, can vary according to your needs and personal situation.
Invest according to goals (and time frame)
The second variable that decides how much money to invest is the financial and vital goals and when these goals are desired to be achieved. This affects both the risk that can be assumed and the recommended amount to invest.
It is important to divide investments into short, medium and long-term according to timeframes. In the short term, there is an emergency cushion or more defensive product, such as deposits or deposits. conservative PIASvery stable because the goal is to protect your money.
In the medium and long term, it is when you can take more risks and make more profits. Again, as time passes and it’s time to reap the fruits investment planReducing risk and even capital will be increasingly recommended.
a case study
Who today is not worried about the amount of pension he will receive when he grows up?
The first thing to do on this path is to be clear about how much you need the retirement you want and work from there to achieve it. The most important thing when choosing investment products is to focus on the long-term and take advantage of tax deferral. In other words, you don’t have to constantly pay taxes on them.
This is where options such as a portfolio of mutual funds, PIAS, retirement plans or PPAs emerge. All of them have their advantages and financial characteristics.
120 rules for making your decisions
What do the numbers say about how to organize investments by age?
The general rule is the one we developed and summarized earlier: Invest long-term and take more risks when you’re young..
The translation is that the most conservative portfolios tend to contain a higher percentage of fixed income. The lower this percentage of fixed income, the higher the portfolio’s risk, but also the higher the potential profits.
What percentage of fixed and variable income should you include in each moment of your life? A simple way to get an idea is the rule of 120, which is based on a certain distribution of fixed income and equity percentage. According to the 120 rule, you just need to subtract your age from 120 and you’ll get the percentage of shares you need to add to your portfolio. In short, the recommended risk according to age.
Investing is not easy, but it will help you achieve future goals, especially in a time as tumultuous as this one. retirement plans and mutual funds They’re two good bets.