Would you like to get more benefits for your money? Do you want to grow your wealth in the long term? Then, you need to know which are the most profitable investments and how to choose them according to your risk profile, your objectives, and your time horizon. And in the constant search to grow our wealth, investments are presented as an attractive and, in many cases, necessary option.
Most profitable investmentsTherefore, this article will be your guide to enter the fascinating world of the most profitable investments, exploring from the most basic concepts to the most promising places to place your capital.
What are profitable investments?
The first thing you need to know before investing is what profitable investments are. Profitable investments allow you to obtain a profit greater than the opportunity cost of your money That is, they generate more income than you could obtain if you left your money in a bank account, a deposit, or another low-risk, low-return asset.
The profitability of an investment is measured by the percentage of profit you obtain on the capital invested in a given period of time. Therefore, before investing, you must define your risk profile, which is the level of risk you are willing to assume based on your financial situation, your experience, your knowledge and your tolerance for volatility. Depending on your risk profile, you can choose between different types of investments, which are classified into two large categories: fixed income and variable income.
In addition, it must be taken into account that to carry out profitable investments, investment decisions must be made. Investment decisions are intrinsically linked to evaluating risk, choosing between variable and fixed income options, and establishing a time horizon that aligns with your financial objectives.
What is fixed income and variable income?
Fixed income is an asset that pays you fixed or variable interest based on a previously established term and conditions. For example, bonds, bills, promissory notes or deposits. Fixed income is considered a low-risk and low-profit investment since it guarantees you periodic income and the return of your capital at maturity unless the issuer goes bankrupt or defaults on its obligations.
On the other hand, variable income is an asset that does not pay you a fixed interest rate, but whose value depends on the evolution of the market and supply and demand. For example, shares, investment funds, ETFs or derivatives. Variable income is considered a high-risk and high-return investment, as it offers you the possibility of obtaining large profits, but also of suffering large losses.
These two types of income have advantages and disadvantages, and there is no one that is better than the other. The important thing is that you choose the one that best suits your risk profile, your time horizon, and your objectives, while providing you with financial security. In addition, you can combine both in a diversified portfolio that allows you to balance risk and profitability, and take advantage of the opportunities that the market offers you.
Best time to invest
The best time to invest is when you have capital that you do not need in the short term, that you have previously saved, and that you are willing to risk in search of a higher return. There is no magic formula for knowing when to invest since the market is unpredictable and subject to multiple factors that can affect its behaviour.
However, there are some tips that can help you make better investment decisions:
Define your investment strategy.
Establish your goals, your time horizon, your risk profile, and your budget. This way you can choose the investments that are most suitable for you and avoid being carried away by emotions or trends.
Diversify your portfolio
Invest in different asset classes, sectors, markets, and geographic areas. This will help you reduce the overall risk of your portfolio and take advantage of the opportunities that diversity offers.
Invest in the long-term
Long-term investing allows you to obtain higher returns and take advantage of the effect of compound interest, which is the interest generated on the initial capital and the accumulated interest. In addition, long-term investing allows you to reduce the impact of market fluctuations and the costs associated with the investment, such as commissions or taxes.
Take advantage of market downturns.
The market does not always rise, but it also has moments of decline or crisis. These moments can be a good opportunity to buy shares at lower prices and obtain higher future returns. That is, as long as you have a long-term vision and do not invest more than you can afford to lose.
Review your portfolio periodically.
The market is constantly changing, and what is a good investment today may not be so tomorrow. That’s why it’s important to review your portfolio periodically and make the necessary adjustments to keep it aligned with your strategy, your risk profile, and your objectives.
Best investments 2024
In the complex world of finance, the choice of where to invest in 2024 can be overwhelming. This year, it seems, the markets are regaining the returns they missed last year. However, it is essential to maintain a focus on the long term, regardless of the fluctuations that investments may experience.
So, when thinking about where to invest at the moment, in terms of the variety of investments, and in a concise way; deposits have again caught the attention of many investors after the increases in interest rates, although to find the most profitable deposits, it is necessary to turn to the European market. Also, remunerated accounts have re-emerged after several years of inactivity.
Likewise, during the last months of 2023 and at the beginning of 2024, many individuals have chosen to acquire Treasury Bills, since they offer yields above 3%.
In the face of high inflation and economic uncertainty, one strategy adopted by asset managers is dividend investing. Dividend-paying stocks offer protection against general price increases and have demonstrated market outperformance in periods of slowing growth.
A notable investment option is to take advantage of long-term themes, known as megatrends, which represent significant changes and improvements in future lifestyle habits. These include advances in biotechnology, and measures against global change and technology, among others.
In addition, in recent years, healthcare and biotechnology have emerged as relevant themes, with strong growth in healthcare companies expected to continue. Another alternative is automated managers, also known as Robo-advisors, which have gained popularity by offering customized solutions based on your risk profile and financial goals. For long-term investment, investment funds offer diversification and professional management.
