The 5 safest investments you can make in your life


June 25, 2020

Have you thought about investing?

The investment has become part of the vocabulary of our day to day; from those millennials who want to secure their future, to those workers who are about to retire and who are thinking about how to increase their savings to enjoy even more their retirement.

However, we do not all know how to start investing or where to do it.

It is common that the investment generates doubts, especially when we have lived economic crises, frauds and scams. So that you have an idea of ​​what we are referring about, there are people who still refuse to use the bank or who still believe that their money is safe stored in their house, for example under their mattress or their little pig.

Not all of us understand the concept of investment very well. Some still confuse it with the action of saving money or we believe that when we start to invest our money will automatically multiply and we will become millionaires making a minimum investment.

One of the reasons why it is difficult for us to understand about the investment is because it involves more technical knowledge or requires more things than just saving money. This does not mean that to invest you need to be an expert, but as we have already mentioned in our definitive guide of the real estate investor, knowledge is a big part of the key to success.

Each investment represents a certain grade of risk, and the lower the risk, the safer your investment is. There are people who believe that this can be a double-edged sword, because if you invest with less risk, your returns are lower. However it is not always so. There are investments that can grow your money without having to risk it too much.

Of course, this will depend on the type of profile you have as an investor, your objectives and goals in the short, medium or long term. So before talking about the 5 safest investments you can make in your life, we need to clarify two important points: what is the investor profile? and what you need to consider to start investing.

What is your investor profile?

Not all investments are the same, just as not all investors are. While there are those who prefer safe investments, there are those who are more motivated by the high risk and the profits that these can bring.

The investor profile, as the name implies, is a series of characteristics based on the way in which the individual makes decisions related to the investment. There are 3 types: the conservative investor, the moderate investor and the risky investor.

The conservative investor is one who does not feel comfortable risking a lot and prefers safe investments.

The moderate investor is one who prefers investments with moderate risk, seeks to maintain a balance between the return on their investment and the security of it to avoid very high risks.

The risky investor is one who is attracted to risk, their investments may be short-term but they prefer long-term investments.

Some moderate investors prefer to invest in government CETES, while risky or aggressive investors prefer to make movements in the stock market that may or may not result.

It's not that there is a better type of investor, however, your investor profile can help you to know what type of investment you want to make, and so you can start researching and studying more about it.

Now that you know what your investor profile is, it's time to talk about what you need to know before you start investing.

The 5 safest investments you can make in your life
You can choose what type of investment you want to make according to your investor profile: conservative, moderate or risky.

What do you need to consider to start investing?

Saving and investing are not the same. While saving can allow you to put together a certain sum of money, an investment can make your money generate profits that you only have without doing anything with it.

In addition, there are investments that can help you protect your money against inflation, and therefore can make your money worth more - or not lose its value - in case of a devaluation.

These are our tips that can help you before investing or so you can make better investments.

Do not invest in what you do not know

If you know Warren Buffet, you probably know his famous phrase: "Never invest in a business you cannot understand".

With the advances of technology many consider investing in cryptocurrencies or in companies and applications, however this can be dangerous if you do not know what they are talking about.

Try to invest in a market or industry where you have an understanding of how performance works to know if at least it is feasible in what you invest your money. Imagine that you decide to invest in an app because it is what is in trend, do you know how that app can monetize its use and generate money?

If you are determined to invest in any sector or industry, it is very important that you prepare yourself so that you can take care of your money and make better decisions about it.

Diversify your investment portfolio

We have already talked about the risks you have if all your money is in one basket.

Make sure your investment and portfolio is diverse so that you can emerge victorious in case of a crisis.

Even when you invest in real estate -one of the safest investments you can make in your life- the recommendation is that you try to do it in different types of properties and areas, so you can be protected and you can have different types of income depending on the areas you invest

Diversifying your investment portfolio is something that you should consider from the beginning, so just like the first point it is important that you learn about the other industries where you are investing or where you intend to do it.

The 5 safest investments you can make in your life
Investing in real estate is one of the safest options since you can generate income and the value of the property is increased thanks to the capital gain.

The 5 safest investments you can make in your life

1. Invest in real estate

You probably already imagined it, investing in real estate is one of the easiest and safest ways to grow your money. And in fact it is one of the choices when you want to invest your money in times of crisis.

Why? First of all, investing in real estate is insurance against inflation. In why invest in real estate? We had already mentioned a bit about the subject. Broadly speaking, inflation is what is called the prolonged period in which the products and services of a country increase their prices. It can occur for different reasons, such as when the demand for these goods and services exceeds the existing supply or when the prices of raw materials increase and the producer increase his prices to continue maintaining his profits.

That is why real estate works as an insurance against inflation, since when the prices of goods and services increase, so do those of the real estate market. In addition, the prices of real estate are handled by dollars, so your investment is also insured.

Another thing that we should also mention about inflation and investing in real estate is that the properties end up being tangible properties, so your investment is also insured against pyramidal or digital fraud, which are the order of the day.

Far from inflation, one of the benefits of investing in real estate as you should already know is the capital gain.

The capital gain is the increase suffered by real estate and not directly related to it: the location, amenities, and services offered around the property are good examples of how a property can increase its price.

The best thing about real estate investment is that you can buy these properties in pre-sale, that is, you buy them at a price even lower than what is budgeted, a price that will rise later thanks to -as we already mentioned- the capital gain.

And we are not mentioning the profits you can make if you decide to rent your property.

We always emphasize that real estate is a long-term investment, but the truth is that you can also generate income with your property. In moving from Canada to Mexico in an easy way, we mentioned how those people who are looking to retire to Mexico for tax reasons or the extreme cold of their country, end up living 6 months here and 6 months in Canada, so they make their homes of retirement can be rented the season that they are not living.

This allows them to obtain more income; Real estate developments in Tulum for example, have become one of the favorites of retirees, especially with the technological facilities we have today. For example, we have already talked about how you can generate extra income with your property and Airbnb so now you can not only rent your property in the traditional way, but you can also do it in this app.

So even when you have invested in real estate developments in Merida, you can take advantage of this app and become a host for foreigners who are looking to live a unique experience in the city whether for business or pleasure.

2. Invest in CETES and Mexican government bonds

CETES or Federation Treasury Certificates are one of the safest investments you can make in your life because they represent a minimal risk.

The CETES - in the case of Mexico - are backed by the Mexican government and it is this one that is responsible for returning your money - since it is like lending money to the government - plus the return on your investment.

Each CETES has a cost of $ 10.- MXN pesos and the minimum investment you must make is $ 100.- MXN pesos, that is, you would be buying 10 CETES.

The terms to acquire them range from one month, 3 months, 6 months or one year. That is to say that each determined period you can invest in CETES and at the end of this you will be receiving your returns, which depend on the term you choose, being the highest 8.20% for one year and the lowest 8.04% for one day.

In addition, we must point out that the CETES is also a kind of insurance against inflation. For example, this year the highest percentage for CETES is 8.20% compared to 3.9% of inflation. While the money of some can be devalued thanks to the increase in the prices of the products, your money will be insured and will not lose value.

Banner of real estate developments in Merida.

3. Invest in US government letters, notes and bonds

In the same vein, we have to talk about the debt securities offered by the Treasury Department of the United States government. They are divided according to the type of time in which you can invest your money.

The function of the debt securities is very similar to the CETES. The government uses these titles to collect money and establish projects, meaning that the government acquires a debt with you and the interest on the debt is paid within the terms of the title you choose.

For example, treasury bills also known as T-Bills are short-term securities, which can be charged between 4, 13, 26 and 52 weeks. In this case, the T-Bills are sold at a lower price than they would normally be and this difference (or the interest that corresponds to it) is paid at the end of the term (as in the CETES).

In the case of the notes, these are for terms of 2, 3, 5, 7 and 10 years. Interest is paid every 6 months for the duration of the term of the note you have acquired. It is very important that you choose what type of term you want to invest because the notes cannot be charged ahead of time. What you can do is resell them to someone who acquires the debt of the US government with you.

The same happens with the bonds, which have a duration of 30 years. The interest is fixed and the bonds cannot be cashed before the agreed term, but if you can sell it to a third person.

One thousand dollars.
The bonds are a safe way because you have the government's backing to pay you.

4. - Investment funds

We already clarified that having your money stored under your mattress or in your pig can be self-defeating. This is because having it there does not generate any profit, on the contrary, they can be victims of inflation.

Ideally, if you already have a certain amount of money saved, you decide to invest it. So far we have seen government debt securities, which offer you higher interest rates than a bank could offer you. However, if you want to do something a little riskier, the investment funds can be for you.

An investment fund is an institution that is responsible for managing and collecting the money of several people to invest in shares that may not be able to access only for economic reasons -exceeds from your budget-, geographic -produce from another country or They are foreign companies- or because you do not have the right knowledge yet and you do not feel safe doing it on your own.

In Mexico, there are 4 types: variable income. Debt instruments, capital instruments and those with a limited purpose.

  • Equities: If you are thinking of investing in the long term this type of fund may be for you. It is more oriented to the stock market since these funds usually invest in shares.
  • Debt: These funds invest in debt instruments -such as CETES and bonds-, so the company or institution in which they invest are those that must pay said debt or obligation.
  • Capital: These funds are oriented to invest in companies or private institutions that are looking for investors to be able to finance themselves.
  • Limited purpose: Are the funds that invest exclusively in the institutions, companies or actions that previously established in their bylaws, that is, while the other funds can invest in different companies, in those with a limited purpose, investors know exactly where they are going to invest.
The 5 safest investments you can make in your life
If you think to invest in investment funds, try to make your investment portfolio as varied as possible to diversify your investments.

5. - Investment funds and savings for retirement

Maybe now it does not seem necessary but investing for retirement is essential. In What is the best age to invest in real estate? We mentioned the importance of starting saving now for your retirement; the more time passes the harder you will be able to save for your retirement.

In Mexico, the AFORE or the administrators of the retirement fund are private financial institutions that -as the name implies- are dedicated to managing the funds of the workers for retirement, regardless of whether they are salaried employees or freelancers.

In the case of being salaried, the employer contributes 5.15% of your salary - if you are quoting in the IMSS- while you contribute the 1.125% and the government the 0.225%.

But in case you are a freelancer, the contributions you make will be voluntary. That is why it is important that you start investing and making voluntary contributions on your own, since - regardless of whether you are a salaried employee - the more money you contribute, the better returns you can have to obtain a better quality of life.

What these administrators do with the money they receive is to invest it in investment companies known as SIEFORES - Investment Companies of Retirement Funds - where, depending on our profile of the saver - young investors have a more diversified profile than the one of the closest workers to retire - invest so that we can have better returns at the time of retirement.

So you already know, every investment requires risk and the smaller the risk the lower the probability of obtaining higher returns.

This does not mean that all investments are bad, on the contrary invest helps you protect your money against inflation and get better returns for your money than simply keep them saved.

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