Mutual funds is not a financial product that is going through the best of times. If not, on the contrary, and according to the most recent data provided by the Association of Collective Investment Institutions and Pension Funds (Inverco) show that the reimbursement that are giving order to their headlines is reaching levels never seen in recent years. Where the progressive exit of these financial assets is one of the common denominators of this very special market.
It cannot be forgotten that during this year, which is about to end, a good part of these investment funds are in a situation that could be classified as very delicate. With significant drops in its valuation and in some cases in two-digit percentages. But this scenario has been exacerbated by the fact that they do not only affect equity-based funds as one might think from the outset. If not, on the contrary, those of fixed income are also being victims or even from the so-called alternative models.
This fact has led many small and medium investors to be very concerned about their investments and in some cases they have had no choice but to close your positions on some of these financial assets. In some cases to enjoy your profits (with a purchase that is five or more years old) and in others to not further influence your losses. It is precisely this last scenario that is the most dangerous for holders of investment funds and they have had no better solution than to close positions to allocate liquidity to other financial products that produce greater security at this time.
Investment funds most punished
In the negative section in this class of products intended for investment are those from the Emerging International Equities and Euro Equities (excluding Spain) the categories that have registered the greatest decline in these last months of the year, with negative month-on-month returns of over 5%. The former is also the category with the greatest adjustment in the year (-8%). To the point that the number of participant accounts in national investment funds decreased in the last month (almost 140.000 compared to the previous month), and its figure was very close to ten million participants.
On the other hand, during the last month, the European stock markets experienced corrections (for example, the selective index of Spanish equities, the Ibex 35, closed with respect to the end of July at -4,8% and the EuroStoxx 50 did so at -3,8%), while the main stock indices in the United States continued with the upward trend of the previous months. Although in the last two months corrections have been imposed on these stock indices. Beyond other technical considerations and even from the fundamental point of view.
While on the contrary, and having fixed income as a reference source, its evolution in financial markets has also been very disappointing for small and medium investors. Because indeed, the IRR of the German 10-year bond has fallen in the month to 0,34% from 0,45% at the end of the previous year, while on the other hand the yield of the Spanish 10-year bond has increased slightly to 1,42% from 1,38 %. Where, the risk premium in Spain has closed at 114 basis points by 98 which it showed at the end of July.
Lack of stakeholder interest
All these data have had a conclusive effect on the attention of small and medium investors in this class of financial products. Many of the individuals have decided to reimburse their shares in about levels that had not been seen in recent years. In order to realize this very special situation in which investment funds find themselves, it is necessary to show that the number of participant accounts in investment funds is going to close in all probability very close to 11.000.000 units.
This data in practice means that they are something more than 200.000 accounts less than the all-time high that had been reached last June. As a historical reference, it should be noted that in the deepest years of the economic crisis, between 2007 and 2009, the total equity in collective investment institutions fell to 200.000 million euros. While the middle of this year the number of investors has doubled from lows, but in the last two months it has fallen. To the point that a good part of financial analysts are of the opinion that this is an investment sector that is showing signs of exhaustion.
How to avoid losses in funds?
It is not very unusual to think that some investors in this class of financial products are in the red. Or to understand it better, that your balance sheet is that of some losses in the equity invested until now. Faced with this unwanted scenario, there are several strategies that small and medium investors can use. The first one is to directly make refunds for avoid further capital losses. Facing another year that is expected to continue to be very complex for financial markets.
Another of the actuation systems that can be imported from now on is the one derived by continue as up to now. In other words, staying in investment funds with a medium term and especially long term. Not surprisingly, it is the natural state of investment funds, as advised by all financial analysts. A mutual fund cannot be like buying and selling stocks on the stock market that can last a few months. In this product analyzed to obtain the expected returns, at least three or four years will have to be spent. Not surprisingly, it is your most profitable period until the monetary contributions are recovered.
Reviews in investment portfolios
A third strategy in investing consists of review the investment fund portfolio every certain period of time. As for example, every year and this is the time to fully dedicate yourself to this task since the end of the year is certainly very near. It is based on something so simple, but at the same time difficult to carry out, such as substituting less profitable investment funds for those with greater growth potential for the coming years. Even rotating the careers from variable income to fixed income or vice versa, depending on the real state of the financial markets.
On the other hand, you must bear in mind that the transfers in investment funds is a very beneficial operation for your personal interests. Among other reasons because it won't cost you a single euro nor will there be any kind of commissions for developing this very special movement. With the sole condition that you do it within the same bank or financial institution. In addition, it is an operation that you can carry out as many times as you want, there are no limits, not even restrictions on the number of transfers that you are going to carry out from now on.
Tax advantages of transfers
You should not forget that transfers in investment funds also provide tax benefits that can generate more than one joy at some point. For a reason that you will understand very easily and that is that you will not have to declare benefits on your next income statement. While you continue to keep your savings in mutual funds as you always have. You can even wait for tax rates to drop so you can save money on this operation. Of course it is not the same do it at 18% than at 15%, to cite just one example.
As a last alternative to improve the income statement in your personal or family assets, there will always be the option of abandoning investment funds to move towards other safer banking products. As for example, fixed-term deposits, corporate promissory notes or even high-paying accounts. However, the interest rate that these savings models will offer you will not be much at this precise moment. With commercial margins that barely exceed 1%. Although at least you will have the assurance that you will not lose money and you will get a fixed and guaranteed income every year.
With this alternative to investment, of course, you will not become a millionaire, but at least it will help you sleep better in very complicated and volatile scenarios for all financial markets. As is happening now with a good number of small and medium investors who have opted for this option. To try to save a bad year, both in equities and in fixed income, as the 2018 financial year has actually been, which is about to end in a very short space of time. With commercial margins that barely exceed 1%. Although at least you will have the assurance that you will not lose money and you will get a fixed and guaranteed income every year.