{"id":28840,"date":"2022-03-30T21:00:00","date_gmt":"2022-03-30T19:00:00","guid":{"rendered":"https:\/\/www.11onze.cat\/?p=28840"},"modified":"2022-04-04T09:02:02","modified_gmt":"2022-04-04T07:02:02","slug":"mutual-funds-security-vs-profitability","status":"publish","type":"post","link":"https:\/\/www.11onze.cat\/en\/magazine\/mutual-funds-security-vs-profitability\/","title":{"rendered":"Mutual funds: security vs. profitability?"},"content":{"rendered":"<div class=\"component text\">\n  <div class=\"container\">\n\n\n    <div class=\"row\">\n      <div class=\"col  col-lg-8  offset-lg-2\">\n        <h3><b>Mutual funds are a booming financial instrument, which generally offered high returns last year. However, the current uncertainty is increasingly calling into question the trend of recent years to replace more conservative options with riskier ones.<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">At the end of 2021, <\/span><b>the estimated assets of investment funds and investment companies worldwide exceeded 61 trillion euros.<\/b><span style=\"font-weight: 400;\"> To get an idea of the volume, suffice to say that it is equivalent to three quarters of the world&#8217;s GDP. In Spain, the figure reached 620 billion, 18% more than in 2020, and its profitability in the year as a whole exceeded 6%, according to data from <\/span><a href=\"https:\/\/www.inverco.es\/archivosdb\/ahorro-financiero-de-las-familias-iics-y-fp-2021.pdf\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Inverco<\/span><\/a><span style=\"font-weight: 400;\">, an association that brings together collective investment entities and pension funds in Spain.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In percentage terms, <\/span><b>mutual funds and investment companies already represent 15.7% of the financial savings of Spanish families, <\/b><span style=\"font-weight: 400;\">a percentage that is only surpassed by Belgium among the large EU countries, with 17.4%. In Italy, they account for 15.1%, in Germany 12.7% and in France less than 5%.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is partly explained by the fact that <\/span><b>mutual fund holdings in Spain have tripled over the last decade<\/b><span style=\"font-weight: 400;\">. On the other hand, the investment horizon of savers in the long term (more than three years) has <\/span><a href=\"http:\/\/www.observatorioinverco.com\/dos-tercios-los-ahorradores-espanoles-no-cambiado-perfil-riesgo-covid-19\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">increased<\/span><\/a><span style=\"font-weight: 400;\"> significantly in Spain from 35% to 49% in just two years.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, we cannot lose sight of the fact that <\/span><b>deposits and cash still account for most of the financial assets of Spanish households<\/b><span style=\"font-weight: 400;\"> (41%), a percentage that is only surpassed by Portugal (48%) among the major European economies. In France, they account for 29%, in Italy 32% and in Germany 39%.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<h3><b>Different products for different investors<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Worldwide,<\/span><b> 47% of the assets of investment companies and funds are in equities<\/b><span style=\"font-weight: 400;\">, 20% in bonds and the remainder is divided equally between mixed and money market products, which invest in the short term in a given currency.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However,<\/span><b> this distribution varies considerably from one country to another.<\/b><span style=\"font-weight: 400;\"> For example, while equities account for 59% of the total in the United States and 51% in the United Kingdom, globally in Europe they account for only 34%. And there are also considerable differences in mixed products, which in Spain are the second most important, with 31% of the total, while in the United States they account for only 6%.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Over the last 15 years,<\/span><b> Spanish investors tended to replace more conservative options with riskier ones<\/b><span style=\"font-weight: 400;\">. Thus, while in 2007 money market, fixed-income and guaranteed funds accounted for 64% of investment, in December 2021 they accounted for only 18% of the total.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<h3><b>Performance in question<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">However, this greater appetite for risk and variable returns does not seem entirely justified if we look at the long-term performance of mutual funds as a whole. An IESE <\/span><a href=\"https:\/\/deliverypdf.ssrn.com\/delivery.php?ID=199020086001028017126011114124121099104015006077091033071072020106070085067001069103097114000125006036111069120070071124066120062015046052031094099124029001088062036073117103094082114071084071001099085105071025080077005123120117121121124121071092&amp;EXT=pdf&amp;INDEX=TRUE\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">study<\/span><\/a><span style=\"font-weight: 400;\"> indicates that <\/span><b>the average annual return of 562 funds that have been active in Spain over the last 15 years was only 1.91%<\/b><span style=\"font-weight: 400;\">. In fact, only 64 of these funds were more profitable than government bonds, and 68 of them had a negative return.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, in a context of rising inflation and economic uncertainty, in addition to the probable rise in interest rates by the European Central Bank and the U.S. Federal Reserve, <\/span><b>doubts about the evolution of equities arise.<\/b><span style=\"font-weight: 400;\"> For this reason, some voices point out that guaranteed investment <\/span><a href=\"https:\/\/www.11onze.cat\/en\/magazine\/guaranteed-funds-what-are-they-how-they-work\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">funds<\/span><\/a><span style=\"font-weight: 400;\"> can be a good option for investors seeking an appropriate balance between risk and return.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><strong>If you want to know more about superior options to make your money profitable, go to\u00a0<a href=\"https:\/\/www.11onze.cat\/en\/?page_id=26828\" target=\"_blank\" rel=\"noopener\">Guaranteed Funds<\/a>. 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