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How to invest 80,000 euros: here’s what the experts from MAPFRE Gestión Patrimonial would do

Feb 22, 2024

Redacción Mapfre

Redacción Mapfre

An inheritance, severance pay, years of disciplined saving... there are different reasons you could suddenly find yourself with 80,000 euros in your checking account. And although the European Central Bank (ECB)’s efforts to rein in the CPI are slowly bearing fruit (ending January at 2.8% in the Eurozone, according to Eurostat's preliminary estimate), the fact of the matter is that money that's sitting in your bank account is going to suffer from inflation. And although there are those who think that this is the best way to preserve capital, the reality is that by doing so, you end up losing purchasing power.

One way to combat this effect is by investing. Putting money to work with long-term objectives can help build financial security and achieve goals such as supplementing your retirement savings, buying a home, or paying for your children's education.

However, the world of investments can be complex and overwhelming, especially for those looking to invest for the first time. Here’s where a financial expert can be vitally important. How? By providing guidance, helping to navigate the deep sea of investment products, and adapting strategies to each person's needs, as well as trying to ensure that the investor is well positioned to face different economic scenarios.

For Daniel Sancho, Investment Manager at MAPFRE Gestión Patrimonial (MGP), there’s no doubt that caution and planning are essential when entering the investment world. "The first time you invest, the recommendation is not to take on too much risk,” explained the head of investment at MGP.

Generally speaking, your risk tolerance and the deadlines you set for yourself are two of the main premises to take into account when defining a portfolio. If you’re willing to take a risk and have a horizon of about seven or eight years, you might be comfortable with a higher exposure to equity. However, for new investors, the expert always recommends a gradual approach that allows them to become familiar with the market through a controlled experience.

Initially, Sancho would go for an asset distribution of 20% in equities and 80% in fixed income, progressively adjusting this proportion as the saver gains confidence and knowledge. Thus, the starting point is "a cautious portfolio" which is worked on gradually, and when "the customer feels comfortable", the configuration would be switched up to a higher risk strategy.

To accompany the customer both at the outset and during this process, the "best tool" is periodic contributions: they require less initial effort for the investor, mitigate more risks, help keep your emotions under control (especially negative ones in times of losses), and help you get more out of compound interest. In the case of this capital of 80,000 euros, Sancho suggests allocating most of the initial contributions to fixed income and subscribing equity funds "little by little."


The value of asset management

When it comes to asset allocation, MGP fully understands how valuable asset management is, especially in the current market environment, where uncertainty continues to be the dominant issue. Thus, the work of a fund management team is critically important for the continuous portfolio monitoring and adjustment, with profitability as the ultimate objective, anticipating cycles, responding to unforeseen events, etc.

Based on this approach, they opt for flexible global fixed income "to enter the playing field and harness opportunities," and because based on current monetary policy, "we no longer have to be so afraid of maintaining investments." They would also include monetary funds "to control portfolio volatility." As Sancho summed up, in fixed income "the most important thing is to diversify, always seeking some level of security in credit risk and leveraging active managers who detect opportunities in global markets."

As for equities, MGP's investment manager favors a diversified portfolio in terms of sector, geography, and management style, because although indices are currently very concentrated in a small number of companies, and he doesn’t rule out that the "magnificent seven", for example, could continue to rise, he sees opportunities in other companies. "We pursue active management, concentrated portfolios, and convincing ideas," he added.

Now that we've looked at what you should do, let's look at what you shouldn't. For starters, when asked "what do we do with liquidity?", Sancho responded emphatically: once you have enough saved up for a rainy day and have available funds, “in MGP's opinion, there’s no doubt that monetary funds offer much better returns than checking accounts.” In other words, interest-bearing accounts and deposits are a no-no. He also cautioned against prematurely including alternative investments, as although they’re good for diversifying portfolios, their high entry levels and illiquid nature make these asset types less than ideal for newcomers. "Getting your bearings with alternatives is not altogether advisable," he asserted.

In conclusion, Sancho emphasized that, although volatility can be intimidating for beginners, with the right advice and a well-defined strategy, it’s a factor that can be managed effectively. "You don't have to be afraid of volatility, as long as you understand what it is and, most importantly, the duration," he concluded, highlighting the importance of a long-term perspective when investing.

Good prospects for the markets in the second half of the year

Good prospects for the markets in the second half of the year

The first half of 2024 was quite positive for equity markets, and forecasts for the next six months are equally bright. Which sectors have the most potential? What about fixed income? Alberto Matellán, chief economist at MAPFRE Inversión, goes into the details.

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