Understanding Short-Term Investment Objectives
Short-term investment objectives typically span from days to five years, focusing on goals such as an emergency fund, purchasing a car, saving for a down payment, or wedding expenses. The primary concern here is liquidity and low volatility to ensure funds are readily available when needed.
Importance of Liquidity and Low Volatility
In short-term investments, the impact of compound interest is minimal. Therefore, prioritize liquidity and capital preservation over high returns. This doesn’t mean returns are unimportant; it’s crucial to invest wisely and maintain the purchasing power of your savings.
Investment Options for Short-Term Goals
- High-yield savings accounts: Consider neobanks or Sofipo accounts, ensuring not to exceed the protection fund limit (approximately 200,000 pesos).
- Daily liquidity funds: Invest in high-performing, high-quality credit funds.
- Staggered Cetes investments: Divide your funds and invest a quarter at a time, every seven days, for weekly maturities.
- Cetes with longer terms (up to two years) or Udibonos (three-year terms): These offer guaranteed real returns above inflation, regardless of market conditions.
- High-risk, low-volatility instruments: For those with high risk tolerance and long-term horizons (over three years), consider a small allocation to volatile assets like dollar-denominated bonds or stocks, ensuring market downturns don’t jeopardize your goals.
Accessibility and Minimum Investment
Cetesdirecto allows investments starting from just 100 pesos with no additional fees or commissions. It also offers daily liquidity from a high-quality short-term investment fund.
The automatic savings feature in Cetesdirecto is particularly useful for various goals, making it easy to save and invest without much thought.
Alternative Investment Options
Some lesser-known options include additional savings opportunities offered by insurance companies to policyholders with life insurance. These often provide attractive returns higher than Cetes, accessible at any time. Always review the track record and terms before choosing this option.
Transitioning to Medium and Long-Term Investments
Once you move beyond five-year horizons, the range of investment options expands significantly. Diversification becomes crucial for managing risk and enhancing expected returns. We’ll delve deeper into portfolio construction in the next part.
