In the investment world, market changes are the only constant. However, there are 7 financial assets that work in any market cycle, providing stability and profitability to investors. Whether in times of growth or recession, these instruments have proven to be reliable options to protect and grow capital. What are they and why do they stand out in any economic scenario? In this article, we will explore each of them so that you can make informed decisions in your investment strategy.
1. Gold: The refuge par excellence
Gold has been a reliable financial asset for centuries. In times of economic uncertainty, its value often increases due to its perceived safe haven status. In addition, in periods of inflation, gold tends to protect investors’ purchasing power.
Benefits of investing in gold:
Hedging against inflation
As mentioned above, gold has proven to be an excellent hedge against inflation. When the purchasing power of fiat currencies decreases due to rising prices, the value of gold tends to rise. This makes it an attractive option for investors seeking to preserve their capital over the long term.
Portfolio diversification
As an asset with a low or even negative correlation with other financial instruments, it helps to balance losses in bear markets. Many strategic investors allocate 5% to 10% of their portfolio to gold to improve the stability of their investments.
High liquidity and global acceptance
Gold is one of the world’s most liquid assets. It can be sold almost anywhere on the planet without losing its intrinsic value. Whether in the form of bullion, coins or even gold-backed ETFs, this asset can be quickly converted into cash if needed.
Acts as a tangible asset free of credit risk
Unlike stocks, bonds or mutual funds, gold does not depend on the solvency of any financial institution or the payment performance of third parties. It is a physical asset that investors can own directly, eliminating the risk of default or bankruptcy.
Long-term value growth
Although the price of gold can fluctuate in the short term, its historical trend has been upward. As global demand increases, especially in emerging markets such as China and India, gold continues to establish itself as a safe-haven asset with growth prospects.
2. Government bonds: Security and Stability
Government bonds, especially those from countries with strong economies such as the United States, are considered low-risk investments. In bear markets, investors tend to shift their capital to these instruments because of their safety and regular interest payments.
Recommended types of bonds:
- CETES in Mexico. We recommend you read our article: ” What are CETES?“where you can learn more about these assets in order to invest.
- Bonds of countries with high credit ratings.
3. Shares of companies with solid dividends
Dividend-paying stocks have proven to be resilient in different market cycles. These companies tend to be stable, with positive cash flows and a consistent profit sharing policy.
Examples of sectors with reliable dividend companies:
- Consumer staples (Procter & Gamble, Unilever).
- Energy (ExxonMobil, Chevron).
- Health (Johnson & Johnson, Pfizer).
4. Real Estate: A tangible asset with growing value
Real estate is an excellent long-term investment option, as its value tends to appreciate over time. In addition, rental income can generate steady cash flow, making it attractive even in times of economic uncertainty.
Types of real estate investments:
- Residential properties in high demand areas.
- Commercial real estate.
- FIBRAs (Real Estate Investment Trusts) in Mexico.
5. Commodities: Diversification and inflation hedging
Other financial assets that work in any market cycle are commodities. Such as oil, natural gas and industrial metals are the main ones. During inflation, these commodities tend to increase in value, providing investors with a hedge.
Key raw materials to consider:
- Oil and gas.
- Copper and lithium (key for technology and electric cars).
- Agriculture (wheat, corn, coffee).
6. Index funds: Diversified exposure with lower risk.
Index funds allow investors to have exposure to a broad set of assets with less individual risk. By replicating indexes such as the S&P 500, these funds can generate good returns regardless of market cycles.
Advantages of index funds:
- Low fees compared to actively managed funds.
- Long-term growth track record.
Immediate diversification
When investing in an index fund, shareholders gain exposure to a broad range of assets within a single fund. This reduces the risk associated with investing in a single stock or sector.
For example, an index fund tracking the S&P 500 will offer exposure to 500 of the largest U.S. companies, which lessens the negative impact of a particular company’s underperformance.
Consistent long-term performance
Studies have shown that, over the long term, most index funds outperform actively managed funds. This is because, by replicating an index, they eliminate asset selection errors and keep costs low, resulting in more stable performance.
For example, the S&P 500 index has had an average annual return of 10% over the past few decades, and many index funds have achieved similar results.
Transparency and traceability
Index funds are transparent, as investors know exactly which assets make up the index they track. In addition, it is easy to track their performance by simply observing the performance of the benchmark index.
In Mexico, index funds such as those that track the S&P/BMV IPC allow investors to easily monitor their investments without the need for complex analysis.
Excellent option for beginning investors
Due to their simplicity, index funds are one of the best options for those who are starting out in the investment world. They allow access to a diversified portfolio without the need for in-depth knowledge of the financial market.
7. Cryptocurrencies: An Emerging Asset with Growth Potential
The key to a good investment is to analyze the market, carefully study the behavior of cryptocurrencies and consider various investment strategies, whether in times of economic stability or uncertainty.
Reasons to consider cryptocurrencies:
- Decentralization and resistance to censorship.
- Long-term appreciation potential.
- Growing acceptance in the global economy.
Diversify and earn
The key to successful investing in any market cycle is diversification and resilient asset selection. From gold to index funds, each of these assets has proven their ability to generate sustainable returns regardless of economic conditions. If you’re looking for a solid strategy for your portfolio, expert guidance is essential. At Algo Global, we help you design an investment plan tailored to your objectives, with the best options in the market. Ready to strengthen your financial future? Contact us today.
