Monetary funds have become one of the great unknown by small and medium investors. Perhaps because of their low profitability in recent years and that therefore they do not make them prone to hiring. In a general environment, where investment funds as a whole registered a positive return of 1,58%, with which the profitability in the first half of the year meets 4,83%, which represents the best historical profitability accumulated in a first half for Investment funds.
But where the monetary funds surely have not been the ones that have developed the best performance in this period. Partly due to its excessive link with the price of money, at a time when the interest rate is at 0%, its lowest level in its entire life. As a result of the monetary policy carried out by the authorities of the European Central Bank (ECB) in their desire to boost the economy of the euro zone after the economic crisis of 2008.
It is true that monetary investment funds are stable, but with little profitability and this fact removes attractiveness among small and medium investors. To the point that they are inclined towards other models in their administration, such as investment funds in equities, fixed income or even absolute profitability as a formula to make their savings profitable with greater guarantees of success from now on. But what are monetary mutual funds really like? Well, we are going to give you the essential keys in case from now on you will find it necessary to hire these financial instruments.
Monetary funds, what are they like?
This class of investment funds are constituted in formats whose assets are incorporated by short-term fixed income instruments, at least 12 months. They are fundamentally characterized by their high security and liquidity. As a result, they are distinguished from other funds by having very low returns and volatilities. Right now, your annual interest is barely over 0.50% at best. In other words, practically nothing and that allow investors to opt for other models in their administration. To this end, they are very similar to fixed-term bank deposits, with a very similar line of behavior.
While, on the other hand, monetary investment funds are not the best way to make capital profitable to the desire of small and medium investors. If not, on the contrary, they help to obtain a minimal retribution in the best of cases. It is not possible to speak of investment with these weak intermediation margins. And therefore we are talking about a product that is intended for a very conservative investor profile. In general, older people who are unaware of the news that originates around the always complicated world of money.
Lower commissions
On the contrary, and as a most outstanding element is the fact that its commissions are the lowest in the investment fund sector. With rates that rarely exceed the 0.6% level. In other words, lower than in the rest of investment funds, both variable income and fixed income. So that the small expense compensates for the minimum profitability offered by these financial instruments. With an offer, which without being as powerful as in the rest of investment funds, it does cover the demand of its holders.
Another aspect that must be addressed when talking about monetary funds is that they can serve as a complement to other investments. Both equities and fixed income, even though their mechanics follow absolutely different paths and it is convenient to analyze them before their viable subscription. Whatever the case, it can be said that these funds are profitable, but quite the opposite. With a reduction in contracts made by users, according to the latest data sent by the Association of Collective Investment Organizations and Pension Funds (Inverco).
When can they be hired?
The investment strategy in this class of funds is carried out in a very punctual way and with conditions that must be respected at all times. In other words, in a context of weak equity markets where investors seek refuge from monetary flows. Where your security prevails over other more aggressive investment strategies. Knowing in advance that there will be very little interest to be gained from now on.
On the other hand, these special investment funds are practically stagnant. Without moving in one direction or another so that there is no news in investment. In practice, this means that no money will be made or lost from this investment. An aspect that may be sufficient in times of great downturns in financial markets since money is protected from the umbrella of these financial assets. Beyond another series of considerations of a technical nature or also from the point of view of its fundamental principles. Something that surely does not appeal to all retail investors.
Contributions to these funds
With these characteristics that we have analyzed in monetary investment funds, there is no doubt that it is not necessary to invest a lot of money. Among other reasons because nothing will be achieved in the performance they offer. If not, on the contrary, it will be enough to make minimal contributions in the best of cases and in times of greater instability and volatility in the financial markets. So that no losses are installed from this dynamic in our portfolio of investment funds. As part of a very defensive or conservative strategy that aims to preserve savings over other considerations.
Although on the other hand, there is also the impact that funds of these characteristics are not made to get large amounts of money. If not, on the contrary, it is a form of investment that has gone out of fashion since it is about models that our parents or grandparents used to make their savings profitable many years ago and that at that time had their reason for being and were. even profitable because the average interest was at levels very close to 7% or 8%. And therefore we could get a return on our savings that is now impossible to obtain.
Tones in these products
Whatever the case, there are other negative items in monetary investment funds that must be analyzed before a viable hiring of them from now on. As an example, that because of the commissions at the end you can lose money in these personal savings formats. As well as its null profitability after several years of permanence and that favors that after many years our balance in the fund is more or less as at the beginning. Without creating a savings bag as was our main idea and that can lead to real disappointment being installed in our state of mind as small and medium investors that we are.
Although to finish, it must also be taken into account that it is very unlikely that these financial instruments will make any type of investment. If not, they are for a very specific moment and I do not want to import a return to savings that is satisfactory for our personal interests. Whatever the case, and undoubtedly one of the most unsatisfactory investments that exist today, even below fixed-term bank deposits. Where the profitability at the moment is almost nil. And so it seems that it will be in the coming years, where there will be no choice but to take risks to obtain a return that is at least acceptable to all.
Investment grows this year
A certain truce in the trade war and the much more conservative attitude of the Central Banks towards possible interest rate hikes, has caused notable optimism in financial markets, which are recovering part of their May adjustments. Almost all equity benchmarks closed June positively, with returns ranging from 2.2% for the Ibex 35 to nearly 7% for the S&P 500.
Likewise, the debt markets registered price revaluations with their IRRs at historical lows, according to the latest data provided by the Association of Collective Investment Organizations and Pension Funds (Inverco). The yield of the German 10-year bond closed the month at -0.32%, while the 10-year Spanish public debt reached 0.39%. Whatever the case, the profitability of these products is still at too low levels to be accepted by small and medium investors. Without creating a savings bag as was our main idea and that can lead to real disappointment being installed in our state of mind as small and medium investors that we are.
