Having a conservative investment strategy for times of economic uncertainty is critical when financial stability is threatened. Especially during this time, opting for more cautious investment approaches can help you minimize risk and protect your capital. In this article, we will explore safe and stable options so you can make informed decisions and grow your assets in a changing economic environment.
Why choose a conservative investment?
Conservative investing offers greater security for those who seek financial stability and wish to avoid significant losses. During periods of uncertainty, such as economic crises, high inflation or market fluctuations, this type of strategy allows you to maintain the value of your capital while earning moderate returns.
Conservative investments tend to focus on assets with lower volatility and high liquidity, ideal for those who prefer to have a solid foundation. They also provide the flexibility to adjust to market conditions without compromising initial capital.
Main conservative investment strategies
Fixed-income funds.
Fixed income funds focus on bonds and debt securities that offer safe returns. In these funds, the return is stable and the risk is relatively low, making them a popular choice in times of uncertainty. The performance of these funds depends largely on interest rates and the credit rating of the issuers, such as the government or reputable companies.
An example of a fixed income fund is the Bonos M. These are debt securities issued by the Mexican Federal Government for a term of more than one year. They are considered a fixed income investment because they offer regular interest payments and their principal is backed by the government. They are available in terms ranging from three to thirty years, and since they have a fixed coupon, the investor knows how much he/she will receive periodically, which allows for reliable financial planning and minimizes the risk of volatility.
Let’s imagine that you purchase 10-year M Bonds with a fixed rate of return of 8% per annum. By investing $100,000 MXN, you will receive $8,000 MXN in interest each year for a decade. At maturity of the bond, the initial principal of $100,000 MXN will be returned to you. This type of instrument is ideal for those seeking stability and predictable long-term returns, trusting in the soundness of the Mexican government to meet its payment commitments.
2. Treasury Certificates (CETES)
As we have mentioned in different articles of our blog, CETES are debt securities issued by the Mexican government, which promise guaranteed returns in a determined term. This instrument allows investors to protect their money with a fixed rate of return and without significant risks. It is an excellent alternative for those who want a secure approach, with the peace of mind that their capital will be backed by the government.
3. Investments in precious metals.
In times of economic uncertainty, precious metals such as gold and silver are considered “safe havens of value”. Having intrinsic value, these assets often appreciate when economies are volatile. Although their returns are variable, they tend to retain their value over the long term and can be an effective form of diversification.
By buying a 100-gram gold bar, for example, you secure a portion of your capital in an asset that historically retains its value. In addition, you can sell it when the price of gold rises, earning a profit, or keep it for the long term as a safe asset.
4. Time deposits.
Time deposits are a simple and safe strategy that offers fixed returns over a fixed term. This type of investment allows investors to receive interest on a regular basis, which ensures a steady and predictable flow of income. In addition, at the end of the term, the invested capital is recovered, which makes it an ideal option for conservative profiles.
An example of a time deposit is the Fideicomiso de Inversión en Instrumentos de Deuda (FIIID), offered by institutions such as the Instituto para la Protección al Ahorro Bancario (IPAB) or some investment funds that operate under government regulations.
These instruments operate similarly to traditional time deposits, but may offer greater security because they are backed by the Mexican government, in some cases. These trusts invest in low-risk debt instruments, such as government bonds or government-backed securities.
5. Emergency funds.
An emergency fund is essential in times of uncertainty. Keeping a portion of the capital in cash or highly liquid instruments ensures that the investor can access his money in case of emergencies. This investment strategy not only minimizes risk, but also ensures the immediate availability of resources.
How to choose the right conservative investment strategy?
Choosing the best conservative investment strategy depends on several factors, including the investor’s profile, financial objectives and risk tolerance. To determine the most appropriate option, it is advisable to carefully analyze your investment term, the amount of return you expect to obtain and the liquidity of each instrument.
In addition, diversifying among different strategies will allow you to have greater protection of your capital and help you avoid relying exclusively on one type of asset. Diversification is a key principle in any investment, and when applied to conservative approaches, it helps reduce risk considerably.
Tips to protect your investment in times of uncertainty
- Stay informed: Constantly monitor the economic environment and changes in government policies. This will allow you to adjust your strategy when necessary. And avoid panic-influenced decisions.
- Look for conservative investment alternatives: As described above.
- Periodically review your investments: Evaluating your portfolio on a regular basis will help you make the necessary adjustments according to the market context and your financial objectives.
- Prioritize liquidity: In times of uncertainty, holding investments with high liquidity allows you to have cash quickly in case of emergency or need for change.
- Contact Algo Global. In times of economic uncertainty, choosing an experienced manager, such as Algo Global, can be an excellent alternative. With its professional approach, it also offers diversified investment portfolios, including low-risk options such as fixed-income funds, tailored to each client’s needs. These types of strategies are ideal for those seeking stability and security, without compromising long-term profitability.
Opting for conservative investment strategies for times of economic uncertainty is a smart move to protect your wealth and ensure a moderate return. These strategies allow you to keep your capital safe and stable in an unstable economic environment, offering you peace of mind and the possibility of generating returns at a steady pace.
Whether you opt for fixed income funds, CETES, precious metals or time deposits, the goal is to find an investment mix that aligns with your profile and current needs. Conservative investing can be the key to maintaining a healthy and stable financial situation over the long term.
