You probably have some extra money and are thinking about investing it, but you may not know where to start. To make the right decisions and find the best way to grow your capital and earn higher returns in the future, it is essential to know which are the best assets to invest in.
There is no doubt that there are many alternatives in the market. From more traditional options such as stocks and bonds, to financial vehicles such as index funds and ETFs. However, each of these assets has unique characteristics, different operating mechanisms and specific investor profiles. Therefore, it is essential to understand them and assess the investor’s risk tolerance, which will ultimately help determine in which assets to invest or not to invest.
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ToggleWhat is risk tolerance, and why does it determine the best assets to invest in?
In the investment world, risk tolerance is an investor’s ability and willingness to accept losses in his or her investment portfolio. This ability relates to the amount of market risk such as ups and downs or volatility that a person can tolerate.
Knowing the level of risk tolerance is essential to develop an appropriate investment strategy that helps select the best assets to invest in, aligned not only with financial objectives, but also with each investor’s personal profile and individual circumstances.
In practice, this concept varies from one person to another, as it considers important factors such as financial situation, age, capital, expenses, outgoings, among others.
Best assets to invest in according to the level of risk tolerance:
Choosing the best assets to invest in requires a thorough understanding of the investor’s risk tolerance level. What may be considered the ideal asset for a young investor looking for aggressive growth may not necessarily be suitable for someone approaching retirement and looking to preserve their capital.
Among the main assets to be considered are:
- Index funds: Index funds are among the best assets to invest in, especially for investors with a moderate risk tolerance. This means that while they are willing to accept some volatility in the market, they also value stability and security that allows them to grow their capital steadily over time.
Unlike other investment vehicles, index funds offer diversified exposure to a broad set of stocks within the index they track. This diversification helps mitigate the risk associated with investing in a single asset, as the performance of a single security has a reduced impact on the total investment.
They also have lower fees compared to actively managed funds. This difference in costs translates into higher long-term returns, making them an attractive option for investors who want to maximize their returns without incurring high expenses.
- ETFs: For those with varying risk tolerance, one recommended option is ETFs or Exchange-Traded Funds, which are bought and sold on stock exchanges as if they were individual stocks.
One of the main advantages of ETFs is their ability to offer exposure to a wide range of sectors and markets. By replicating stock indices, bonds or other assets, ETFs allow investors to diversify their portfolios without the need to purchase each of the underlying assets individually.
On the other hand, they are liquid and can be bought or sold at any time in the secondary market, which provides greater flexibility.
- Bonds: A safe and stable alternative for investors with low risk tolerance. It is among the best investment options because of its ability to generate predictable income without the volatility inherent in other markets such as equities.
When an investor obtains a bond, he is essentially lending money to an entity, be it a government, a corporation, or an organization. In return, the issuing entity agrees to repay the amount borrowed, i.e., the face value of the bond, on a specific date and to pay periodic interest (the coupon) over the life of the bond.
This structure makes it an attractive option as an asset, without exposure to higher risk and with safe returns.
- Savings portfolios: For extremely conservative profiles that seek first and foremost to protect their capital, savings portfolios represent one of the best assets to invest in. These portfolios are specifically designed with liquid and safe assets, allowing them to prioritize capital preservation while providing stable returns.
Thanks to their composition, the risk related to savings portfolios is minimal; moreover, the portfolio assets are easily accessible, allowing investors to withdraw their money without complications.
Select the best assets to invest in with inbestMe
The success of an investment depends, to a large extent, on correctly choosing the best assets to invest in, considering the investor’s risk tolerance and expected return.
Investment platforms such as inbestMe offer a range of solutions so that any investor can diversify and manage their capital in an effective and personalized way.
How does inbestMe help you optimize your investment?
inbestMe analyzes multiple factors that influence portfolio construction, such as financial objectives, investment horizon and acceptable level of risk. In addition, it provides an optimized investment experience tailored to the individual needs of each investor.
Thanks to its automated approach and specialized advice, it allows you to select the best assets to invest in according to your risk profile, whether you are a conservative investor who prioritizes security or a moderate or bold profile looking for higher growth potential.