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Investments: some basic notes

“It is not necessary to do extraordinary things To achieve extraordinary results ” Warren Buffet Investing is not an art,

“It is not necessary to do extraordinary things
To achieve extraordinary results “

Warren Buffet

Investing is not an art, nor a science. Investments are decisions. Some of them may, based on a more emotional or more rational approach, but after all, there is nor there is an exact model that feels a future, nor can they get rid of by certain impulses of our right hemisphere.

Making investments requires certain indicative mathematical elements, but the way to obtain the end of them – the maximum profitability – can vary depending on the creativity of the manager when choosing one option or another.

Basic variables

This means that certain indicators, such as the amount required input, return deadlines, marked risk tolerance, or profitability itself, among many other factors, must be measured immovablely.

An effective investor manager should ensure certain expected base parameters or results to undertake any type of economic project with its client, since he intends to obtain the minimum fluctuations regarding the promise-resulting relationship, given that uncertainty Regarding the results, unless he is very said, he has it.

But what is an investment? It is understood as any capital disbursement to obtain benefits or profits in the future. Thus, in terms of selecting the type of concrete operation in the field of investment, today we propose a basic classification for the subsequent analysis at the time of their choice regarding the possibilities that markets offer, through the variables of: nature, Duration, object, knowledge, relationship and expected flows.

mix of variables

Exposing the different variables that come into play in investments is useful to help configure the appropriate mix of guide elements, which as we pointed out above, will provide those expected results, or at least, strategic goals to be achieved.

according to the nature of the invested:

  • Real or productive investments: productive goods or assets, that is, goods whose utility is the production of other goods.
  • Financial investments: those in which there is no creation of wealth, but change of ownership of the good.

depending on the duration of the investment:

  • Short -term investments: they have a duration of less than the year.
  • Long -term investments: its duration is greater than the year.

Regarding the object of the investment:

  • Renewal or replacement investments: when equipment is replaced, facilities for new ones due to internal causes, wear and breakdowns, or external causes such as obsolescence.
  • Expansion investments: to increase the production and sale capacity and thus meet a greater demand in the market.
  • Modernization or innovation investments: They seek to reduce costs, simplify the production process or improve the product to meet demand.
  • Strategic investments:
    • Offensive or aggressive: they look for new penetrations in the market.
    • Defensive: They seek to keep the position on the market.
    • Other investments: They can be social, mandatory, etc.

Starting from the degree of knowledge about the future distribution of capital:

  • Investments in certainty environment: true knowledge of future results.
  • Investments in random or risk environment: the future is only known in terms of probability.
  • Investments in uncertainty environment: the probabilities of future results are not known.

Based on the relationship between two investments with each other:

  • Independent investments: the acceptance of one of the investments or influences the realization of the other.
  • Interdependent investments:
    • Complementary: the realization of one of them favors the realization of the other.
    • Substitute: the realization of one of the investments makes it difficult to execute the other.

according to the sign of the monetary flows generated by the investment:

  • Simple or conventional investments: there is an initial cash flow or even some negative consecutive, and all the remaining ones are positive.
  • Investments not simple or unconventional: some net cash flow is negative and is not consecutive with the initial one.

What to ask an Investment Advisor or Manager

without entering into a scenario in which the client is said in this area and decides -we would then talk about a non -discretion It is a discretionary management.

Now, a case like this, in which an amount of capital is already guaranteed and safe, in others, the term of trust would appear in a contemporary way with the guarantee or security. >

In this sense, first of all, it would be advisable to ask what the priority is. If the priority is the minimum risk, or on the contrary, the maximum profitability. They also affect certain ethical limits that are raised, or even the agglomeration or not of capital in one or other operations.

Likewise, investment managers tend to specialize in certain market segments or investment strategies, so the expertise of said manager also affects one or another certain field, in addition to their experience General in the bearing of investment portfolios.

This simple exercise that the reader has just experienced would be the seeds of a previous diagnosis, something basic of entry to have a profile of the portfolio that will be managed, and that if it does not take place, it could first generate distrust .

Apart from independence, honesty and clarity, we propose as basic competences for investment managers aspects such as:

  • vision : experience, both of the type of investment that poses, as well as advisory practice.
  • quality : the results should not only be reliable, but fully allowed. It is of no use to make profits, if you can open a legal procedure under our feet.
  • transparency : At all times it must be possible to consult and control what the manager is doing. This does not mean snatching independence, but knowing where our heritage is going.
  • regularity : What is the use of winning in a month and losing in the remaining eleven?
  • flexibility : It is evident that not all investors can have the same type and capital size, or even, that the same capacity to diminish in a certain time. It is important, then, to vary the rhythm if we are raised the need.

Thus, after all, what it is, as always, is to bring the high management to which the investment practice is associated daily. To yours, specifically.

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