Introduction to investing
- Despite widespread beliefs, it is not necessary to make a large outlay nor is there a minimum to start investing. With a discipline of recurring savings no matter how small it is, next to a proper management, very ambitious objectives can be achieved in the long term.
- The sooner you start investing, the better. will be the result due to magical effect of Compound Capitalization. predict the timing perfect to enter is not possible.
- Variable Income vs Fixed Income:
- The Variable Income It is currently the most attractive option according to the profitability/risk binomial. It offers you the possibility of selecting and investing among thousands of listed companies in the world and therefore, owning them and their benefits, with unlimited revaluation potential. The average historical annual performance of the American S&P index is 7%, although it is true that the majority of managers have not been able to achieve such profitability in a sustained manner over time.
- In Fixed rent, with the current interest rate environment, it is difficult to find value. Sovereign bonds are not attractive due to their very low profitability. In corporate bonds, you would have to invest in high yield since they offer a little more profitability (~5%) being very selective. Particularly important is the manager's ability to identify companies that offer attractive returns while minimizing the risk of default before which all the invested capital could be lost.
- Considering that the largest monetary injection in history by Central Banks to reactivate the economy is taking place in recent years, special attention must be paid to the inflation. This general increase in prices of goods and services translates into a loss of purchasing power, or in other words, a lower value of money. In this context, If you do not have the ability to make savings profitable, you will be losing power over time, with financial markets being the best protection against inflation. Historically, stock markets have performed quite well in inflationary environments and low interest rates, since on the one hand, investors are forced to invest in risky assets to achieve profitability and on the other, it usually coincides with an increase in the power of investors. companies to raise prices, which results in greater profits. It is essential that it occurs in a context of economic growth (like the current one) to avoid falling into stagflation, which would be a difficult scenario to reverse.
- There are always good investment opportunities, but finding them requires process, strategy and patience. Investing with an entrepreneurial approach takes time to materialize into results. The financial markets are like an ocean full of sharks, so to survive and emerge successfully from it, it is necessary to be very clear about the steps to follow. He who endures and has everything necessary is the one who triumphs.
- Investing requires knowledge, time and dedication. Without this, the best options are through passive or indexed management, or delegate to professional managers. Of course, first you have to find out about the profile of the managers, what products and markets they invest in, how much they have invested of their own capital in the fund, their main positions, etc.
Portfolio Management
Some key elements in Portfolio Management are:
- Stock Picking: investment process to rigorously analyze the business, the financial statements, as well as the growth “levers” of the companies to be invested to find and select the best opportunities that can generate value.
- Asset Allocation: diversification of companies of both types value as growth, with high dividend yield, from different countries, industries and sectors, to reduce risk and maximize profitability. You do not have to label companies by a category and limit yourself to that (e.g.: “I do not invest in technology companies because I am an investor value”) so as not to be left out of many opportunities and without optimizing diversification. The classic distribution of 60% Fixed Income and 40% Variable Income, assets whose behavior maintains a certain correlation, can be optimized by diversifying with other types of investments such as real estate, collectibles or cryptocurrencies. It is also advisable to maintain a % of liquidity to take advantage of the opportunities that the market offers you. It is essential to know and assume the risk of the Portfolio, since it will avoid surprises and making bad decisions.
- Portfolio Evolution: It is necessary to monitor the investments that make up the Portfolio, verify that the investment theses are still valid and the fundamentals intact. This will allow you to make the appropriate decisions and monitor the behavior of the investments in case it is necessary to make any changes. As a general rule, do not sell in panic situations in which you have to remain cool and rational, something simple in theory but difficult in practice.
“If you don't find a way to make money while you sleep, you will be condemned to work the rest of your days.”. Warren Buffett
Dan Benbunan
Portfolio Manager
