How to start to invest in investment funds

We explain how to get started in the world of investment funds.

There is a large range of investment funds on the market. Before choosing one, you should ask yourself these three questions: How much money do you want to invest, for how long and how much risk are you prepared to assume. With these three variables in mind, you will be able to ascertain your investor profile.

Next we will explain the most important points you have to take into account:

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1. Look for the fund that best suits your profile

If you are already sure about your investor profile, you can start looking for the fund that best matches it.

The next step is knowing the characteristics of the fund you are interested in. You will find this information in the fund brochure, which will define its investment policy or vocation and set out what type of assets it invests in (fixed-income, equities, mixed income, guaranteed, etc.). The brochure will also give you other details, such as the scale of risk and the commissions associated with the fund.

Another variable you should take into account is the fund's historical return. When comparing the historical returns of several funds, you should always take funds that have the same investment policy, in other words, funds that invest in the same assets. You should also bear in mind that past returns do not guarantee future results.

Having said that, how do you look for an investment fund? Nowadays there are very useful tools to help you find the fund or funds that are best suited to your needs. BBVA places at your disposal a very comprehensive fund search engine to help you find those that best suit your needs

2. When contracting a fund


Once you are sure of which fund is best for you, you can open it through an institution that markets it. You can do this in a bank branch or online. The second option is faster, because it just takes a few steps to contract the investment. Please note that before you can contract a fund you have to be customer of the bank.

It is important to read the investment fund prospectus so that, among other factors, you are aware of its investment policy and the fees associated with it. It is also useful to know how investment funds are taxed.

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3. Watch your investment

Once you have invested in one or several investment funds, you must be attentive and keep a constant eye on your investment. This doesn't mean you have to check how the fund is doing every day, but it is a good idea to take a monthly or quarterly look at how it is doing. This takes little effort, as the fund manager will send out a quarterly or half-yearly report on the evolution of the fund.

We should emphasize the advantages of having a disciplined savings plan. This is nothing more than paying contributions to the investment funds periodically rather than sporadically. This is an easy way of reducing the uncertainty about which is the best moment to save. Short-term fluctuations in the market can act in your favor, as entering it at different times and at different prices eases the market effect (rises and falls). Moreover, being disciplined with periodical savings makes the financial effort much lighter. Therefore, periodical saving is a much easier, more efficient and convenient way to achieve a future financial goal. By investing regular small amounts, you will see your savings grow over the years.

Finally, we should point out that it is always advisable to put your savings into more than one investment fund, since diversification reduces the risk of losing money if a particular fund doesn't do so well. An investor can either buy them directly or through the discretionary fund portfolio management service offered by BBVA Private Banking.

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