In a context of high uncertainty and extreme volatility in the markets, investment funds have experienced an adjustment in their volume of assets in the first three weeks of March. 26.8 billion euros, mainly due to the devaluation of portfolios due to the market effect (81% of the total equity decrease), and only 19% (5,100 million) has been due to net amortizations, as shown by the Association of Collective Investment Organizations and Pension Funds (Inverco) . This volume of reimbursements, being relevant, is not the highest in the historical series because it has been higher on six previous occasions.
Where a short-term divestment strategy based on emotions rather than medium-term objectives, multiplies the opportunity for error and increases the probability of loss. Not surprisingly, hasty, short-term divestment decisions create missed chances of returns for shareholders. Another conclusion that can be drawn from a sale of positions in this financial instrument is that for those who held their positions in funds with a medium or long-term investment objective, latent losses were later converted into profits; and for those who made new subscriptions at that time, a subsequent profitability was generated.
On the other hand, it is necessary to emphasize, as in the stock market, that it is not the time to sell open positions in an investment fund. Because It's too late and we will carry out this procedure at the lowest part of the price of your securities. With all certainty that with a loss of its valuation in the financial markets. This is true for both fixed income and variable income models, or even alternative ones. To the point that it is very convenient that the profitability data must be analyzed by the members individually, depending on the moment in which they subscribed the investment fund and the profitability they have accumulated and taking into account their investment horizon.
Sell the funds: this is not the time
It is possibly neither the best nor the most propitious moment to carry out this action since investment funds, as they did in similar or worse market situations, continue facilitating liquidity to the members who need it, but also profitable possibilities for others. As a result, there is more to lose than to gain, and therefore we must exercise prudence before making a choice, one way or another. To this end, it is much more prudent to wait until the end of the year and check the real status of our investments. To verify its profitability and see if it is convenient for us to transfer to other investment funds.
If in the end the decision we are going to make is to transfer to other investment funds, we must be very careful with fixed income funds since their recovery will be much slower than in other formats. To the point that it will cost us more to recover the capital invested in this year. On the other hand, we must also assess the advantages that the fact of making transfers gives us from a fiscal point of view. Not in vain, they are operations that will not affect our savings account since they are movements that are exempt from any type of payment and can benefit us in the investment strategies that we are going to carry out from now on. Unlike the redemptions that will have a 19% penalty in case the final balance of the investments is positive from the beginning.
Keys in a portfolio of funds
We must learn from the past, and to this end what happened in this exercise should help us not to make the same mistakes as up to now. One of the recipes to meet this much desired objective is to diversify the investment fund portfolio. We never tire of repeating that one of the best ways to protect our savings It comes from the diversification in these products aimed at private savings. We should not concentrate all the money in the same basket. If not, on the contrary, we must distribute it in several and of a different nature. So that from this dynamic we can more effectively circumvent a scenario like the one we are experiencing today, and even if it is an exceptional event.
On the other hand, a financial asset that should never be lacking in our portfolio of investment funds is that linked to the stock markets. Mainly after the spectacular fall in the price of the shares of listed companies. To the point of representing the authentic business possibilities by the valuation that they have today in the equity markets. Both with regard to the sale of shares on the stock market and the investment funds themselves. With a revaluation potential that is highly estimable due to its depth and that can help us improve the profitability of these financial instruments from now on. Above the situation of international fixed income.
Equitable distribution
What cannot be done is to hire several investment funds of various kinds. It does not make any sense since the only thing it favors is empowering and delve into the same problem. Although it is a mistake that many small and medium investors tend to make with some frequency, especially those who have less knowledge in this type of investment. Beyond the behavior they may generate in the coming years. If not, on the contrary, it is necessary to resort to funds that can complement and even in a certain way neutralize their most negative effects in terms of profitability. Not only with regard to the chosen financial assets, but also in the geographic areas where they are concentrated.
Although on the other hand, no less important is the fact that we must be more cautious than ever before the decrease or suspension of dividends in a large part of investment funds. To this end, it cannot be forgotten that we are at a time when investors are considering whether they are going to collect their dividend for the cascade of suspensions and reductions of the financial assets that make this remuneration to the shareholders. Both with regard to equities and fixed income. Much more attention must be paid to their quality as they are managed very efficiently and can be adapted to all financial market scenarios, even the most adverse. We will have to wait until the end of the year and check what the status of the investments is and therefore the objective is to see if it is convenient for us to make the transfer to other investment funds.
Stock trading soar
The Spanish Stock Exchange traded 55,468 million euros in equities in March, 59.9% more than the same month of the previous year and 46.4% more than in February. The number of trades in March was 7.61 million, 142.3% more than in March 2019 and 82.9% more than the previous month. In March, BME reached a market share in Spanish securities trading of 72.39%. The average range in March was 14.96 basis points in the first price level (16% better than the next trading venue) and 21.43 basis points with a depth of 25,000 euros in the order book (26, a 1% better).
These figures include trading carried out on trading venues, both in the transparent order book (LIT), including auctions, and non-transparent (dark) trading carried out outside the book. While on the other hand, the total volume contracted in fixed income was 31,313 million euros in March, which represents a growth of 26.1% compared to February. Admissions to trading, including issues of public debt and private fixed income, amounted to 42,626 million euros, with a growth of 19.5% compared to the same month of 2019 and 83.7% compared to February of this year. The outstanding balance stood at 1.59 trillion euros, which entails an increase of 0.9% compared to March 2019 and of 2% in the accumulated of the year.
Throughout the month of March trading in the financial derivatives market continued to grow. Especially in Index Futures, in a month marked by an increase in volatility. On March 12, 77,763 IBEX 35 PLUS futures contracts were traded, a daily historical record, excluding expiration weeks. The volume of Futures on IBEX 35 increased by 74.6% and in Mini IBEX Futures by 200.8% compared to the month of March of the previous year. In Stock Options, March was the third consecutive month of growth compared to the same period of 2019, with an increase of 60.4%.
