There is no doubt that one of the most important decisions of our personal finances is to decide how we manage savings. Best Investment funds represent the many financial products that help us in this task.

The problem is that there are as many types of funds as there are investment strategies. This fact can mean that the saver feels overwhelmed and undecided when it comes to subscribing shares, not knowing in many cases how to make an accurate decision.

For this reason, it explains what steps must be taken to choose the best Investment funds that best suits your financial needs.

Managing savings in the right way is a vital part of our personal finances.

Find the best investment funds for savings

The prelude to the investment is saving. The purpose of all investment is to increase wealth. We must keep in mind what sense is given to both saving and investment. Associating these concepts with a material and concrete objective will help us to maintain consistency and discipline.

Do we want to buy a car or other property of a lasting nature? Are we saving for an event in the future? In short, each euro must have an assigned destination engraved. The minimum objective to preserve savings (maintain capital while we decide what to do with it) will be to overcome inflation.

The objectives must be concrete (the more concrete the better). Just as it is necessary to quantify the objective, translate it into a monetary figure. After this, a temporary period must be established to achieve it. The objectives must be realistic in terms of amount and term.

The term of the investment is a very important factor in selecting the type of investment fund most adapted to our financial needs. In fact, both the objective and the deadline are two key aspects of any investment.

Set the maximum risk to assume

Establishing the risk profile involves having to do an introspective work since this depends to a large extent on a psychological factor inherent to each saver.

Concepts such as age, income, family situation and other personal issues influence when defining our profile as an investor. But in short, every saver knows where he has his psychological cap. If not, there is a trick that works very well:

If the investment losses do not let you sleep, it is sure that you are taking too high a risk according to your tolerance.

At the moment we are clear about the maximum level of risk we can assume without suffering serious economic and emotional damage, we can choose the objective of profitability.

Profitability and risk are two concepts that are intimately and directly related. The higher the return, the greater the risk. This will always be the case in the investment world. Beware of those who promise high profitability with little risk when looking at the best Investment funds.

Therefore, the level of risk is established first and then the best return adapted to that level will be sought. Doing it in reverse is a serious mistake.

Preselect investment funds related to us.

After the introspection work, we will have to carry out the research work. Luckily there are fundraisers that make this task much easier. In addition, as soon as the saver is clear about the objective, the time horizon and the risk, it will be much easier to find the ideal savings product.

Now is when the star question comes, fixed income, equities or a mixed fund?

Neither fixed income, nor variable income, nor the combination of both types is good or bad by themselves. Everything depends on the economic situation and our profitability and risk objectives.

At this point, we must inform us how much the fixed income is performing in general terms and if this profitability is consistent with our objective. That being the case, we would not have to assume a greater risk unnecessarily.

Unfortunately, the fixed income in recent times is not giving a good return, thus being necessary to include a percentage of variable income to the portfolio to achieve the monetary objectives in the marked horizon.

One thing that should be clear, the variable income is not suitable for short-term objectives. Due to the volatility it presents, it can ruin our investment strategy. As we get closer to the end of the savings period, we must choose a more conservative investment philosophy.

If the variable income can lose 10% in a year and our time horizon is two years, will there be material time for the investment to recover? It is unlikely. This type of assets work very well for longer horizons, however, you can incorporate a percentage to any type of portfolio to give it an extra return, without losing sight of the risk profile.

In short, we must inform ourselves of the risk and profitability of each category of investment funds. In this way we can limit the universe of these products to a preselection of funds related to our strategy.

Read carefully the DFI of the preselected fund

The Document of Fundamental Data for the Investor (DFI), formerly called simplified informative brochure of the fund, is mandatory delivery to the investor before subscribing participations in the investment fund.

This document summarizes all the relevant background information, which the saver must know to make an informed investment decision. Once an investment fund has been pre-selected, it is necessary to make sure that it really fits our needs through this document.

The data to consult are the following:

• Fund risk profile.
• Minimum initial investment.
• Minimum recommended duration of the investment.
• Places where the net asset value of the fund’s units is published.
• Net asset value and pre-warnings to reimburse participations in the fund.
• Category of the fund, types of assets in which it invests.
• Management objectives.
• Commissions applied and their basis for calculation.
• Historical returns and comparison with the fund’s benchmark.

At the moment that the saver has this information in his knowledge, he can make a good decision to manage his savings. He can choose the best Investment funds. The next step is to execute the subscription of shares in the selected investment fund.

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