Ranking of safe investment funds

We explain what the safest investment funds are for your savings

In recent years, as a result of the decline in deposit yields, investment funds have become an appealing alternative for channeling investment savings. Investment funds are financial institutions that are managed by a group of professional experts who invest the money they have collected from the sale of shares. They are a very useful and practical tool for investors with little experience, as professional experts will choose which financial assets to invest their capital in. The saver's investing profile is the most important factor to consider when choosing an investment fund. There are many investors with a conservative profile who prefer to take on limited risk, even though the expected returns will be lower. They therefore adopt a "prudent" approach for their investors, with the long-term goal of preserving their capital.

In light of this, we have developed a ranking for the different types of investment funds that classifies them based on how much safety or risk they entail.

1. Guaranteed funds

Guaranteed funds are considered the most conservative type of investment fund. On the whole, these funds ensure that the capital invested initially will be recovered. There is practically no risk involved in this type of investment, as long as the investor complies with the final guarantee date, which is why returns are very low.

Some guaranteed funds are fixed-income products, which means they guarantee a fixed return at maturity. With guaranteed equity funds however, it is not certain that investors will receive additional returns on their investment and may only recover the initial capital invested. In any case, guaranteed funds in general offer a totally safe option for the most conservative investors, as they are not at risk of losing their initial capital if they keep their investment until the end of the pre-defined timeline.

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2. Fixed-income funds

These types of funds invest the majority of the capital in fixed-income assets. Fixed-income assets are financial assets that require the issuer to pay out certain amounts over a pre-determined time frame. The amount of these payments includes the initial investment and a specific return.

The fact that these assets have a "fixed" coupon means that the agreed maturity date cannot be altered, not that the value of these assets doesn't fluctuate over time. The initial capital is returned at maturity. This means that the investor will know what return they stand to make on the investment if it is kept until maturity. In any case, the value of these assets tends to remain more or less the same, and any variations that do occur are mainly due to interest rates. As a result, fixed-income investment funds are considered to be low risk, which makes them an appropriate option for conservative investors.

Money market funds offer the lowest risk of all fixed-income funds. As well as being the least volatile of all fixed-income asset investments, money market funds also offer substantial liquidity as they have shorter maturities. This means they can be quickly and easily transformed into cash without losing any asset value, which might be of great use to individuals whose finances depend on these investments.

However, if interest rates are low or negative at the closest maturity date, the expected return on these funds may also be negative, even though they are subject to minimal risk. In other words, money market funds are subject to what could be defined as the cost of safety.

3. Mixed funds

Mixed funds invest in both fixed-income and equity assets. The proportion of capital allocated to each type of asset will determine the risk level (and yield) of the investment fund. However, even if the percentage of capital invested in equity assets is higher than that invested in fixed-income assets, these types of funds are still safer than funds that invest exclusively in equities, as they will always invest a minimum amount in fixed-income assets, and as these tend to behave differently to stock exchanges, they can temper fluctuations in the fund. The main benefit of these types of funds is that they enable investors to diversify investments without having to resort to other investment funds.

4. Global funds

Global funds are entirely free to implement any kind of strategy in terms of types of financial assets and geographical distribution of capital, as they don't have to establish any investment conditions in advance. The aim of this flexible management policy is to give the fund's portfolio the ability to adapt to changing market environments. To achieve this flexibility, the fund must not be bound by any predetermined percentages for each asset class. However, the vast majority of funds involve multi-asset and global products. Therefore, the risk levels associated with them do not usually exceed the risk levels of funds that invest exclusively in equities.
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5. Equity funds

There is no fixed yield for investments in equity assets or stocks: it can be high, low or negative. These types of investments offer unlimited returns; however, they also entail a high level of risk. Stock values are affected not only by fluctuations in the economy and on the market, but also by the performance of both the relevant industry and the company that issued the stock (the latter on a daily basis).

These factors make equity funds somewhat unpredictable, which means they might not be the most suitable choice for investors with a conservative profile. However, investing in stocks is definitely the best option for investors with a more aggressive profile who are looking for the chance to achieve higher returns.

This ranking reflects the most common investment funds; however, there are various other types of funds as well. Obviously, the safer the investment fund, the lower its expected yield.

Invest safely with BBVA

Do you want to find out which investment fund best suits your needs and objectives? Go to bbva.es and discover our own funds and a series of investment fund tools that you can use to compare, simulate and calculate your investments. . If you would like to receive bespoke advice to help you make the best decision for your savings, discover BBVA Invest and get a made-to-measure investment proposal.

 

Finally, we are pleased to inform you that BBVA Asset Management, the unit of the BBVA Group that brings together investment and pension fund managers from around the world, has been presented three awards at the 30th edition of the Expansión-Allfunds Awards (presented by Allfunds Bank and Expansión). On the one hand, it received the award for Best Asset Allocation Fund Manager. And on the other, the BBVA Plan 30 pension plan was recognized as the Best Aggressive Multiasset Pension Fund and the best manager as the Best Pension Manager. This is a true acknowledgment of its work, especially over the last three years, which have seen BBVA Asset Management significantly transform its asset allocation process.

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