Whenever a company or an investor decides to invest money, it sets a goal that can be either long term or short term. In general, a short-term investment should produce lower returns. While long-term investments are required to produce higher returns, this is due to the longer term. In these cases the risks or uncertainties are greater.
For some investors, short-term investments are very attractive because they offer a very fast return on investment and are therefore more secure. On the other hand, the major drawback is that, generally, because they are such short periods, the return on investment will not be as high as we expect. Therefore, our idea of building a large capital will not be possible if we invest in the short term. Given the concept of compound interest
1. Invest money intelligently in the short term
Four types of short-term investments and their advantages and disadvantages are presented below:
1.1 Bank savings deposits
Term Certificates of Deposit (CDT) are securities issued by banks to customers in exchange for investing money in them. This year, on average, they are offering an effective annual rate of return of 5%. If we discount inflation, which is estimated to be around 3%, we will have a real return on investment of 2% effective annual return.
These products are generally not the ones that assure the highest profitability, but they manage a very low risk profile and with terms that vary between 3, 6, 9 or 12 months. In other words, with this product you will be able to have a savings that is not very profitable but secure over time.
Shares are products that represent a security issued by a company to capitalize itself and/or solve financing problems. Shares symbolize a part of the equity of a company or enterprise. It is a participation title, i.e. when you buy shares in a company, you become a partner. By their nature, they are always long-term investments; however, if the stock is listed on the stock exchange and trades with sufficient liquidity, it is considered as an option for short-term investments. Stocks are variable income securities because their price is subject to market conditions, i.e. if the company is doing well, so are they. In the same way, if the company goes through a financial crisis, these securities will lose value with respect to their immediate previous price. For this reason, they are called high-risk investments. Their value is affected by general market conditions: interest rate variations, changes in economic prices, among others.
This means that the profitability of shares is generally highly variable because they depend on the company’s business. This is where fluctuations are generated, since they depend on the expectations regarding the company’s future profits.
Usually, investing in this type of securities can represent great profitability if it is done in the long term, but it must be clear that due to their nature, there is also the risk of losing a lot of money.
Commodities are goods that can be traded on the stock market. There are different types of commodities, which can be energy, metals and/or food or input commodities.
This type of investment has the following characteristics:
1. They can be easily negotiated since they are vital inputs for the production of goods and services.
2. When investing money in these types of instruments, one must be aware that they are highly risky investments and the return on investment does not have a clear pattern since it can be affected by climatic, economic or market factors or by natural or political phenomena.
3. Return on investment times may vary depending on the type of product in which you have invested.
4. Investment amounts are usually very high and are generally made by companies with large purchasing power.
Factoring is a relatively new term that began to expand thanks to the existence of the Internet. The idea behind this concept is to connect SMEs in need of cash flow with a group of investors willing to finance or sponsor the company’s economic needs in exchange for a return or a new product. Thanks to this solution, many people can access a very valuable investment product that was previously controlled by banks and other financial companies.
The highlights of this type of investment are as follows:
- Profitability: Generally, this type of investments rent at a higher rate than traditional investments and can reach up to 11 A.D., depending on the transaction to be processed.
- Liquidity: the return on investment varies between 30 and 120 days, i.e. they are short-term and very fast income is received.
- Security: Very precise and selective methods are used for the selection of the different invoices receivable in order to always have a very low risk and ensure the client’s investment.
- Transparency: all the information is transparent both to the company that sells your receivables invoice and to the investor who buys it. The entire operation can be reviewed using the platform.
- Decision power: you can invest in different invoices receivable from different companies and with different amounts. There is no limit to investments and you can start from approximately 1’000,000 COP.
2. Invest money intelligently in the medium and long term
Once the short-term investment alternatives have been analyzed, the main long-term investment options are presented below.
Investment funds are products through which the resources of several people are pooled to make investments. They are managed by managers who are experts in investing money in a specialized manner, which vary according to their specialty:
- Real Estate: to finance the planning, construction and delivery of buildings, which may vary according to their destination: low-income housing, business buildings or warehouses, among others.
- Ventures Capital: to finance ventures or startups with high potential and high scaling business development. It mainly covers: Seed capital or start-up capital.
- Private Equity. This refers to investment in consolidated companies or companies in the growth phase, where there is already a business history and the risk is lower. It can be of the following types: Expansion capital, leveraged buyouts, partner replacement or reorientation (transformation).
They generate a profit for investing money, which is distributed among the people who participate in the portfolio or fund. Among the advantages that can be highlighted for investing in this type of product is the fact that it gives you the possibility of accessing investments that you would not have been able to make individually due to their profile.
Likewise, they are constituted through voluntary contributions to your individual account, with the purpose that the administrator makes investments and obtains a profitability to fulfill your investment plans.
In an investment fund you can strengthen your capital, placing it at the disposal of our expert team. In harmony with what you want, your resources will be invested following parameters designed to strengthen your capital, according to what your risk profile suggests.
The goal of the funds is to put you in contact with people who have the same investment interests as you, with whom they can leverage your money and vice versa. With this tool you grow together with the people with whom you share your dreams.
Investment funds have proven to be the ideal mechanism for foreign investors interested in investing in Colombia.
Contact us and we will help you find investment opportunities for your organization.
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