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Consulting Insights

Banking - Funds in Mexico

Are you going to save that extra cash under the mattress? This article may result interesting:

Wouldn't it be nice to place your money on a trusted firm and time after get it back plus some gains? You'll just need to sit tight and wait...wait for the perfect time to get it back. 

Sounds great, right? 

During 2015 in Mexico, only 2.9% of the population (According to “El Economista”) invested on BMV (Bolsa Mexicana de Valores), we are behind US where 55% of the population (According to Statistics Portal) is investing on stocks. 

Funds are one of the most common vehicles of investment. A fund is created when a group of investors that doesn't know each other put their money together to buy investment instruments, and the gains are divided among the investors in a proportional way. Stocks, bonds, cash and mutual funds are examples of investment instruments. The main objectives of funds are:

1) Access to sophisticated investment instruments at a low cost. Why? Because there are instruments that need an initial investment of high amounts of money that a single individual probably won't be able to pay. It becomes more accessible for a single individual to invest with a group of people investing on the same vehicle.

2) Professional administration of the fund by a manager. Investors usually don't have the time and knowledge to administer their investments. Funds have a personal manager that is dedicated full time to take care and has the knowledge to manage the fund. The cost for the management and consultancy is paid by all the investors.

3) Diversification – A fund may be holding a wide array of stocks from different industry sectors to reduce the amount of risk.  Maintaining diversification prevents events that affect one sector from affecting an entire portfolio. Also, a fund may be holding governmental debts, company debts, stocks, etc.

4) Liquidity – Most of the funds have an immediate liquidity, meaning that the same day or within 24 hours, the investor can retrieve his money.

There are different types of funds, the ones that are steady - with low risk - and the risky ones with higher returns. Debt funds (Bond/Income fund) are low risk and the returns are steady, the gains are defined and the average percentage of return gains is about less than +6%. On the other hand we have variable income funds that are risky,  because they are tight to day to day decisions, economics and politics, not only national, but international as well.  A portfolio made of a pool of stocks is an example of variable income funds, there will be periods where the performance of the fund will be impressive, and other days where something political or economical will negatively affect its performance, it depends on many factors that are not controlled by the investor.  Below you can find the closing numbers of Mexican funds that had a very good performance during 2013:

Fund: VALUEV5 B,  Financial Institution: Value, Closing 2013 figure: +26.05%

Fund: IXEESP BFM1,  Financial Institution: Banorte, Closing 2013 figure: +23.43%

Fund: SELECTO B1, Financial Institution: Santander, Closing 2013 figure: +20.59%

So, are you still going to save that extra cash under the mattress? Or are you going to take a look at Fund investments? 
Just remember to avoid being a capitalist pig. :)

Fernando C.

Fernando C. is a Software Engineer with 5 years of experience on Quality Assurance, actively involved in investment systems. When he is not working, Fernando is listening to music, playing the guitar, watching sports, and/or  reading trending news. He hates mornings and loves the dark,quiet and peaceful nights.