Guide to creating a successful investment portfolio in Spain

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The creation of an investment portfolio is included within our financial plans. Investing is one of the easiest decisions to make. However, it is not always easy to do it correctly. That is why we have created a practical and concise guide to strategically advise you when investing.

Why is it so important to guarantee the success of our investments?

Being aware of the role that investments have in our economy can lead us to change our mentality about an activity that should never be taken lightly. An adequate strategy in this field will not only allow us to improve our quality of life in the present, but will also make it possible to ensure a good retirement. Therefore, it is necessary to employ the correct tactics as soon as possible, in order to get away from the dangers of trial and error in such a delicate area of our life.

Variables that must be taken into account to develop a winning investment portfolio

A good investment portfolio must be structured on the following variables, which are the pillars of intelligent investment:

  • Capital

The decision of how much capital to invest is crucial, since the interest rate increases exponentially the larger it is. Therefore, it is not only about investing the capital that we have available for this purpose, but about making strategic alliances with family members and/or business partners. The greater the capital that is achieved to make the investment, the greater the interest and the more comfortable the margin that we have to negotiate the interest rate.

  • Time

Short-term investments are not what might be called “profitable.” For an interest rate to be attractive and, therefore, to generate the desired return, it is necessary to give it the time required to mature and bear fruit.

Consequently, the best investments are those that are made over seven years. As an alternative, a term of five years can be considered, although it is not strategic to carry them out in less than three years.

  • Risk level

A factor that is decisive when determining how much, for what term and in what will be invested, is the profile that one has as an investor. There are three perfectly differentiated investor classes: conservative, moderate and aggressive:

          1. Conservative investor profile

This class of investor opts for security instead of high returns. Its main objective is not to lose the money invested. Since you want to have the security that the investment will generate profits, the best options for the conservative investor are savings accounts and time deposits, since, in addition to offering security, these options are also very clear regarding the exact profit that can be expected from them at the end of the investment term.

A conservative investor could also obtain quite acceptable returns for the risk he assumes by investing in properties on the Costa del Sol. The acquisition of a property allows us to have the guarantee that, even if the value of the land goes down, we will never lose everything. In addition, we can achieve annual returns of over 6% thanks to the rental of the property.

          2. Moderate investor profile

This investor profile is capable of tolerating a certain risk when investing their capital. However, he does not feel comfortable giving up security altogether when risking his capital. Therefore, their operations tend to be a hybrid between capitalization and debt instruments.

This investor has the ability to save and their income is usually, at least, moderate, and they are almost always inflows of money from stable sources.  

          3. Aggressive investor profile

Your goal is to get as much return as possible. Therefore, you will assume the level of risk that investments of this type require. Your best options are the instruments that we can find in all markets and promise very substantial returns, with the consequent risk that this implies.

The best products for the aggressive investor are short- and long-term debt and capitalization funds. Allowing yourself to be an aggressive investor can push your profits to the top, just as it may happen that one morning you wake up to discover that you have lost all of your investment capital.

As long as the money needed to cover day-to-day expenses is not being invested, and our level of tolerance for frustration allows it, this is a very attractive investment modality for those looking for exorbitant profits.

Why is it necessary to know what our investor profile is?

It is more than advisable to know our profile before carrying out the investment, since doing it in a way that is out of step with the personality that we have in this field, can lead us to receive a return that does not even outline the expectations we had when making the investment or, on the contrary, we could be risking much more money than our investor profile admits, which has already proven to be a source of health problems in all its aspects.

Therefore, it is advisable to detect our investment personality and act consistently with it.

Level of liquidity needed

The need for liquidity consists of the capital that the investor needs to have at his disposal while the investment is in progress. If this need is high, there will be no choice but to extract that capital from the investment, which will cause profitability to drop sharply.

The best investments are those that remain intact throughout their investment period. Therefore, it is advisable to seek advice on the most appropriate investment for our case. Contact us. We will be happy to put our knowledge and experience at the service of the profitability you seek.

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