If you have ever thought about making your money grow safely and without complications, surely you have asked yourself: What are CETES? Certificados de la Tesorería de la Federación are one of the most accessible and reliable options for investing in Mexico, both for beginners and experienced investors. But if you don’t know how they work and how they can help you build a solid financial future, don’t worry, in this article you will discover what you need to know about the certificates, from their benefits to key strategies to make the most of them.
What are CETES?
As mentioned above, CETES (Certificados de la Tesorería de la Federación) are debt instruments issued by the Mexican government. They are considered one of the safest investment options in the market, since they have the backing of the State; however, like any investment, they have their disadvantages. Their main purpose is to finance public spending and they offer investors a reliable alternative to make their money grow without assuming large risks but with little yield compared to other alternatives.
How do CETES work?
These instruments operate under a discount scheme, which means that they are purchased at a price lower than their nominal value (generally $10 MXN) and, at the expiration of the time period, the investor receives the full nominal value. The gain comes from the difference between the purchase price and the value received.
For example, if you buy a certificate with a face value of $10 at $9.50, at the end of the term you will receive $10, which represents a gain of $0.50 per certificate.
When you invest in CETES, you acquire certificates that, when they reach their maturity date, are settled at the previously established nominal value.
Terms and interest rates
Certificates are issued with different maturities:
- 28 days
- 91 days
- 182 days
- 1 year (364 days)
CETES interest rates vary according to demand and the country’s economic situation. They are updated weekly at auctions held by Banco de México (Banxico). The 28-day certificates have an annual yield of 5.94%, the 91-day certificates have an annual yield of 6.29%, the 182-day certificates have an annual yield of 6.85% and the 364-day certificates have an annual yield of 7.32%.
Advantages of investing in CETES
Investing in these instruments offers multiple benefits, which makes them an attractive option for both novice investors and those looking for a safe alternative in their portfolio. What are these advantages? Some of them are:
Security and government support
As mentioned, these instruments are issued by the Mexican Government, which means that they are backed by the State. This makes them one of the safest investments in the market, as the risk of default is low compared to other fixed income or equity options.
2. Accessibility for all investors
You don’t need large sums of money to start investing in CETES. With just a little money, you can start generating returns, which makes them ideal for those who are looking to take their first steps in the investment world without committing large amounts of capital.
3. Flexibility in investment terms
CETES are available in different terms: 28, 91, 182 and 364 days. This allows each investor to choose the period that best suits their financial objectives and liquidity needs. In addition, you can reinvest the principal at maturity to continue generating returns.
4. Higher yields on savings accounts
Unlike traditional savings accounts, which usually offer very low interest rates, CETES generally provide more attractive returns for first-time investors. This makes them an excellent option for those looking to grow their money without the risks of equities.
5. Ease of access and online administration
You can invest in CETES 100% digitally through platforms such as Cetes Directo, without the need for intermediaries or commissions. In addition, you can easily monitor and manage your investment from your computer or smartphone.
6. Liquidity and availability
Although CETES have fixed terms, you can sell them before maturity in the secondary market if you need to recover your money ahead of schedule. Although not recommended, this provides greater flexibility in case of financial unforeseen events.
7. Tax exemption on certain amounts
In Mexico, the interest generated by this instrument may be subject to withholding tax, but there is a tax exemption for income below a certain annual threshold, which allows small investors to maximize their returns. Do you want to know more about this topic? We recommend you to read our article: How to take advantage of the tax benefits of investments in Mexico?where you will be able to view and analyze investment instruments that have a lower taxable amount.
Disadvantages of investing in CETES
While these instruments are an attractive option for many investors, they also have some limitations that you should consider before investing. Here are the main disadvantages:
1. Limited returns
Although certificates offer greater security, their returns are often lower compared to other investment options, such as stocks, mutual funds or real estate. If you are looking for higher returns over the long term, you may want to diversify your portfolio with more profitable instruments.
Impact of inflation
While the certificates earn interest, their yield may be affected by inflation. If inflation is high and CETES yields do not exceed it, the purchasing power of your investment may decrease over time.
3. They do not offer periodic payments
Unlike other financial instruments, such as bonds or stocks that pay dividends, certificates only generate returns at the end of the term. This means that you will not receive periodic income for the duration of the investment.
4. Interest rate risk
The interest rates on the certificates may vary over time, which means that the yields you earn will depend on when you make your investment. If interest rates decline in the future, the new CETES you purchase may offer lower yields.
5. Fixed term without immediate access to capital
When you invest in certificates, your money is committed until the maturity of the chosen term (unless you sell them in the secondary market, which may not be favorable in terms of price). This can be a drawback if you need liquidity in the short term.
6. Lack of diversification
Investing only in CETES can limit your financial growth opportunities. For a balanced portfolio with higher return possibilities, it is advisable to combine them with other assets such as stocks, mutual funds or real estate.
Although certificates are a safe and accessible option, knowing their disadvantages will help you make better financial decisions. Ideally, you should use them as part of your investment strategy and combine them with other instruments according to your objectives.
Are CETES right for me?
Certificates are ideal for:
- People looking for a safe investment option.
- Those who want returns without exposing their capital to high risks.
- Investors seeking liquidity in short terms.
- Individuals who want to diversify their portfolio with a stable investment.
Invest wisely
CETES are an excellent option for investors seeking stability and security in their portfolio. They are ideal for those who wish to start investing with accessible amounts and guaranteed yields.
If you are looking to diversify your investments and maximize your returns, at Algo Global we can help you design a customized strategy to optimize your wealth, contact us and grow your money with expert guidance!
