In line with our objective to offer the best solutions to our clients to achieve their financial objectives and cover all their financial needs, we announce the launch of the 2028 target portfolios in two currencies with the following options:
- Euro target portfolios with ETFs (maturity 12/2028)
- Euro target portfolios with funds (maturity 11/2028) only tradable until September 2025 and only available to Spanish tax residents.
- Target portfolios in Dollar with ETFs (maturity 12/2028).
Target portfolios have great advantages, such as an attractive cumulative target return goal of up to 11.4%/18.5%* (annualized 2.7%/ 4.2%*) at a target date, with a high degree of certainty due to their high diversification (although not guaranteed) and with more flexibility and operational and tax efficiency than the direct purchase of bonds or treasury bills.
*in Euros or Dollars respectively
Below is the complete offering of our target portfolios maturing in 2028:
Important note: the calculation of the cumulative target return has been made by compounding as of 11/29/2024 the annualized target return of each target portfolio by the period to maturity for each maturity.
The cumulative target return will be reduced according to the time of contracting (we will update at least twice a month). The annualized target return may also vary over the life of the portfolio, but is expected to vary relatively little.
Target portfolios (and target return funds in general) are designed to be held to maturity, and although they can be liquidated at any time, they can have fluctuations and even lose capital at some point in their life. If you are not sure that you can hold them until the target, consider investing in a savings portfolio. In any case, inbestMe does not apply any penalty or additional cost for closing the portfolio before maturity.
It is also important to emphasize that a target return is not a guaranteed return: as its name suggests, it is the target return that will be met with high certainty if there are no losses on the bonds that compose it.
Compared to a deposit, a bond purchase or treasury bills, inbestMe’s target portfolios have much more diversification and greater operational and tax flexibility.
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ToggleWhy a Target Portfolio?
As mentioned above, target portfolios are bond portfolios that have a fixed maturity date. By purchasing a target portfolio, investors can be reasonably certain of the return they will earn at maturity.
This contrasts with what happens in conventional bond funds, where bonds are not held to maturity and the portfolio is continuously adjusted to keep it within a specific maturity range. As a result, the investor has no certainty about the ultimate return he will get on his investment.
Thus, for example, an investor who buys a target portfolio today with an annual yield of 2.7% as of December 2028 is reasonably certain to earn a cumulative return of 11.4% at that maturity date.
Why do we say that investors can be “reasonably confident”?
Because some bonds within the portfolio could be downgraded and replaced within the portfolio, and some issuer could default on their payment obligations. Given the large diversification of issuers within the funds, these (unlikely) events should have limited impact on risk and return.
At the same time, not all bonds mature, in this example, exactly in December 2028. Some may mature a little earlier, so they will have to be invested by the fund issuer in money market instruments pending the fund’s maturity. This could cause the yield to deviate slightly from the current 2.7%, but not by much.
A target portfolio is especially useful for investors who have a defined goal within the next few years. Suppose you need 100,000 euros to buy a house in 4 years. In this case, it would be very useful to have a reasonable certainty about the return you will get from your portfolio to make sure that this 100,000 euros will be available when you require it. It would not be advisable to invest all the money in stocks, as a stock portfolio can fluctuate a lot over time. In this case, it would be better to have a target bond portfolio, where the return can be known in advance. This option would be more suitable than a traditional bond portfolio, where the return can fluctuate over time. It may even be safer than a savings portfolio, as the IRR of the portfolio is unknown going forward. In the case of a savings portfolio, you would never lose from a negative change in principle, but you cannot know with certainty at what IRR your money will grow in the future.
All our Target Portfolios
At inbestMe, we already offer a full range of target portfolios that we have launched throughout this year. Currently, we have options open with maturities to 2026 and 2027, both in euros and US dollars for ETF portfolios. For portfolios with maturities in 2025, the entry window has already closed for the index fund portfolio and, for ETFs with maturities 31/12/2025 they will close for new entries at the end of 2024, i.e., in a few days. Remember that, for maturities of one year or less, it is more advisable to opt for a savings portfolio.
The following table shows some metrics of our target portfolios since their launch as of 11/29/2024:
The following charts show the evolution of 100 euros or US dollars invested from 09/15/2023 to the close of November in the various ETF target portfolios vs. the Inverco benchmark we use for this type of portfolio.
For example, the target portfolio has accumulated 7.6%, 3.6 percentage points more than the benchmark (Short-Term EUR Fixed Income).
In the following graph, we can see the evolution of 100 euros invested at the end of September 2023 in the target portfolio of ETFs maturing in 2025 in euros. At that time, the portfolio’s IRR was approximately 3%. As can be seen, so far, the dark blue line has always been within the ranges defined by the various scenarios, and is currently slightly above the central scenario. This trend should continue until the portfolio matures, when the red (central scenario) and dark blue (portfolio evolution) lines should converge.