How should I invest my savings?

The question that titles this article is the most frequently received by investment advisers:

How should I invest my savings?

And, unfortunately, the only honest advice we can give is frustrating for those who expected a more specific answer:

That Depends!

What depends? - We are asked, quite logically.

-From the particular situation of each. Her profile as an investor. There is no standard investment for everyone. Each person should assemble its portfolio in accordance with its own characteristics. It is therefore imperative to learn and assimilate a fundamental rule, and keep it in mind whenever you think of doing any type of financial transaction:

"Risk and return are directly proportional: investments that promise higher profits are always higher risk".

Therefore, the first factor to take into account the risk. If this is manageable, then performance is analyzed; if the risk seems too high, then not even worth looking at the potential return.

But the risk is not the same for everyone; it is individual and is based on two key factors that determine its profile as an investor.

What are these factors?

1) Your investment horizon: That is their age. While a 20 year old can take high risks in finding placements with yields ditto, because you have enough time to recover if things go wrong, a young man of sixty or seventy no longer has that advantage. What is recommended, therefore, for anyone to start a fund early in life, is to adapt to the horizon and go making a transition from an increasingly moderate ("high-risk / high-yield") aggressive portfolio to other (risk and average performance) to reach the last stage of his life with a conservative portfolio ("low-risk / low-yield") which guarantees the preservation of capital. This concept has been very well expressed in the recent reform of the pension and unemployment funds for the management of portfolios of members.

Does this mean that a 20 or 30 years should always choose portfolios "High- risk / high-performance" as one of 60 or 70 should do the opposite?

Not necessarily! Age does not replace financial education. Without proper financial knowledge investments "high-risk / high-yield" are not recommended for anyone ... at any age! By contrast, a young man in his seventies sixties or financially well educated can afford to access and benefit from them.

2) The level of risk tolerance: The second factor to be taken into account when looking for a placement for savings. This is measured by the degree of stress that is capable of supporting a person when investments do not go in the expected direction. We've probably all read about the wave of suicides that arises when large financial crises occur ... To that extent can stress, anguish, agony that generates a financial setback, when you are not prepared to support them! However, in most cases, financial setbacks are only temporary crisis, in which, while not suffering financially educated, those who do are making a killing, taking advantage of falling markets to maximize profits ... So important is the financial education! This is what provides us with enough knowledge to differentiate the real crises of temporal and emotional stability to act calmly and make the most of them.

Anyone who does not have adequate financial education should venture into equity investments (stocks, mutual funds, collective funds, options, etc.), because it maximizes the lack of risk and usually end up losing money.

I intend, through this blog motivate my readers learn to invest and obtain high yields. The articles in the coming weeks will serve as appetizer to encourage them to venture into this field. But it will not be enough to read the articles ... must elaborate on the topics covered in each.