It is no surprise that we will still have to live with very low interest rates, even with negative returns. Both on one side and the other of the Atlantic after the decisions of their respective monetary authorities. But that will undoubtedly be a change of strategy in our investments from now on. Because this variation in the investment portfolio can tip the balance in one direction or another. At a time when volatility in financial markets has returned to stay for a long time.
Low rates in equity markets always are well received by small and medium investors. Among other reasons, because this monetary measure injects great liquidity into financial markets. But it is some sectors that are benefited by this kind of measures.
Where getting into debt is cheaper and this factor can influence the decisions you can make in your relationships with the always complicated world of money. Do not focus exclusively on buying and selling stocks on the stock market. If not, on the contrary, you can choose to other alternatives in investment.
Low rates: bad for banks
This monetary measure is excessively damaging to the interests of financial entities. Because their intermediation margins are lower and therefore their profits suffer from this accounting fact in listed companies. To the point that their values depreciate in the equity markets and sometimes with great intensity, as is happening at the moment. The banks they have depreciated in their valuation in recent months as a result of the easing of monetary policy in the euro zone.
While on the other hand, we cannot forget that their earnings are lower since the lines of credit that they commercialize are made with lower interest rates than in other years. In addition, some banks are suffering excessively from these monetary policies and are driving their share prices to record lows in recent years. Therefore, it can be said very clearly that it is not the best time to take positions in the securities of the sector since they can still give you the occasional negative dislike.
Invest in developing a business
On the contrary, one of the options you have to make your capital profitable is to start any kind of business. This is because you can find cheaper credits than a few years ago, so that in this way you can save you a few tenths of a percentage or even a point on the credits of 10 years ago. It is a factor that will undoubtedly help you meet the entrepreneurial needs in your professional profile. To the point that it may be a clear alternative to investment.
At this time, banks offer to obtain liquidity to set up a business a series of credit lines with an interest rate that ranges between 7% and 9%. In addition, in a large part of the banking proposals exempt from commissions and other expenses in its management and maintenance. With conditions that are much more favorable as a result of the drop in interest rates and that invite you to opt for this kind of special investment and that are intended for investors with more risk propensity.
Buying a second home
Real estate investment is another of the options that you have at the moment to make your available capital profitable. In this sense, it is true that house prices have risen in the last year in double digits as a result of the vitality of the real estate market. But in your favor plays the fact that mortgages are still cheaper than ever. Where you can get spreads below 1% in some cases. As well as exempt from commissions and other expenses in its management and maintenance. So that in this way, you can make the operation profitable within several years.
On the other hand, you can also allocate the second home for rent and generate a fixed and guaranteed income every month every year. Where it is necessary to take into account that the profitability for the rent it has been revalued by 50% since the end of the economic crisis in Spain. That is, much more than the interest generated from buying and selling shares in the equity markets. To the point that it has been the choice of a good part of the small and medium investors. With good prospects, at least for the next two or three years.
Take positions in gold
This precious metal is traditionally considered the financial asset par excellence. With excellent returns in the last twelve months and that has led the golden metal to revalue more than 60%. Something that right now is very complex to achieve with financial products such as investment funds, derivatives or even warrants. And of course, doubling or tripling the money that you can make profitable in the operations of buying and selling shares in the equity markets.
While on the other hand, another aspect that you should assess from these precise moments is the fact linked to its high volatility it can play in your interests as a small and medium investor. Because its rising prices can further skyrocket yellow metal prices. Especially if the large investment funds decide to bet on this financial asset that is so conducive to taking positions at this time. It has the favorable opinions of financial analysts from a technical point of view.
Risk premium monitoring
The direct relationship of the risk premium with investments in equities is not direct since it is not related to its evolution. But now, the fact that the differential of a country is narrowing with its reference point is good news for its economy and, in theory, it should reflect the evolution of its stock indices as it is a more competitive economy. And just the opposite in the opposite case. An improvement in this parameter should help the stock markets look better and their share prices rise.
Among other things because it indicates that there is greater confidence in the national economy and this can be transplanted to contributing companies. But this is not always the case, since it will surely be governed by other variables outside the fixed income market, and in this case more dependent on the real state of the companies. From this point of view, it would not be the most advisable to position itself on the stock market if the profitability of the company fell in the coming years. Rather, the appropriate action would be to opt for purchases in this type of fixed income products, either directly or through investment funds.
Inside the bag, the electrics
Of course, one of the large sectors in the equity markets that can benefit from this scenario that we propose is that of the electricity companies. The reason is because they are heavily indebted and a low interest rate improves their expectations to obtain more financing or even for amortization that they have already contracted in previous years. To the point that the price of its shares can pick up this approach in one of the most powerful of the international stock exchanges, especially the Spanish one.
While on the other hand, we cannot forget that this business segment is one of the most promising to distribute a good dividend among its shareholders. With a level of profitability that ranges from 5% to 7% through a fixed and guaranteed payment every year. As one of the incentives investors have to build their investment portfolio.
The FED lowers interest rates
The Federal Open Market Committee of the United States Federal Reserve (Fed) has decided to lower interest rates by a quarter of a percentage point, to a target range of between 2% and 2,25%, thus fulfilling the expectations of the market. This is the first drop in the price of money since late 2008, when rates were lowered to combat the economic recession.
Although from now on, the equity markets will be waiting for new signals from the highest monetary authority in the United States about further cuts in interest rates. And that of course they would be very well received by small and medium investors. Because we cannot forget that this latest cut has come to a handful and financial intermediaries are calling for more aggressive measures that can favor stock markets around the world and especially those on the periphery of Europe. With possible increases in its main stock indices.