Financial investment: 7 options to consider

Discover 7 ways to invest in the financial market to capitalise on opportunities and help diversify your portfolio.

Whether you’re diversifying your portfolio, capitalising on new market opportunities or investing for the future, financial investment is always an option. But with more than 55,000 listed companies and more than 130,000 funds, as well as the many different vehicles available, including shares, bonds and funds, choosing can be a challenge even for those experienced in the field. However, it is possible to narrow down the offering to just 7 options that have stood the test of time and continue to attract investor attention year after year, and a more recent one, cryptoassets, which may be of interest to investors who feel the pull of emerging news.

1. Investment funds 

Investment funds are vehicles that pool the resources of different investors. These investments can be generalised, linked to a sector, geography or stock index. 

One of the features of investment funds is the ability to distribute income to investors, usually on a regular basis. However, there are funds which, whilst providing for this distribution, build the distribution of income into the fund itself, allowing it to be capitalised.

This financial investment option through investment funds also offers investors a degree of liquidity, as the vast majority allow them to redeem their positions at any time. 

If these features match your preferences, investment trusts can be a good way to diversify your portfolio and generate income.

2. Exchange-Traded Funds (ETFs)

Exchange-traded funds (ETFs) are a type of financial investment that track a basket of stocks, bonds or even a specific index, such as the S&P 500 or the PSI-20. Like shares, they are traded on a stock exchange and their main objective is to replicate the performance of the benchmark index they track.

One of the key benefits of ETFs is the instant diversification they offer investors – you buy a small slice of all the stocks that make up the underlying index. This makes it possible to quickly and efficiently gain exposure to a larger number of securities or specific sectors with a single investment.

3. Bonds

Bonds are debt securities issued by companies or governments to raise funds from investors. The issuer agrees to pay the investor a fixed rate of interest over the life of the bond and to repay the face value of the bond at maturity.

Bonds can have different characteristics, such as currency, maturity, interest rate, form of payment and guarantees offered by the issuer. These characteristics affect the investment’s risk profile and return expectations. For example, long-term bonds tend to offer a higher rate of interest but are also subject to a higher level of risk due to the uncertainty associated with the longer time horizon.

One of the latest innovations in this area is the issuance of sustainable bonds, which are issued by organisations that meet a range of ESG requirements. According to the  S&P Global Ratings’ Sustainability Insights, sustainable bonds will continue to grow, with green bonds being the most representative, driven by the increase in environmental projects.  

[Source: S&P Global]

4. Shares

For many people, shares are one of the most familiar forms of financial investment. As a shareholder in a company, you are entitled to a share of its profits when dividends are paid, you benefit from the company’s performance and, in some circumstances, you can vote on certain decisions. Another advantage is the liquidity of this investment. In most cases, it is possible to sell a position at any time and from anywhere in the world in a simple way, through applications such as GoBulling, developed by Banco Carregosa.

However, picking stocks requires a lot of research. For example, the S&P 500, which tracks the 500 largest US companies, has returned 7.6% a year since 1971. That may seem high, but not so much when you consider that Warren Buffett has outperformed the S&P 500 by 20% a year over the past few decades. The bottom line is that even in a growing market, expert advice is essential to know where, how much and when to invest. Of course, in more challenging economic times or when entering new markets, expert support is even more important.

5. Private Equity

Private equity is a form of financial investment that involves buying stakes in unlisted companies. Private equity investors can be investment funds, private equity firms themselves, pension funds, wealthy families or institutional investors.

Although fundraising was down in 2023, fund managers in Europe raised more than $400 billion, the highest volume ever in the region, so investment volumes are expected to increase in the short term. In addition, private equity assets under management increased by 8% to $8.2 billion. 

A distinctive feature of private equity is its active involvement in the management of portfolio companies. As well as providing capital, private equity managers can also provide strategic advice and operational support to help companies achieve their performance, expansion and growth objectives 

6. Precious metals

Investing in precious metals, such as gold, can be a way of protecting investment portfolios and is seen by many investors as a safe haven. Precious metals are seen as safer investments in times of economic instability and geopolitical uncertainty. They can be acquired in physical form or through financial products (such as investment funds, ETFs and futures contracts). The global precious metals market was valued at €241 billion in 2022 and is estimated to grow at a compound annual growth rate of 6.8% from 2023 to 2030. 

7. Cryptoassets

Cryptoassets are digital assets that use cryptography to ensure secure transactions and control the creation of new units. They are an emerging asset class with the potential to transform the global financial system. The best known is Bitcoin, but there are many others, including Ethereum, Ripple and Litecoin.  

[Source: Crypto]

The figures show that ownership of cryptoassets grew by 34% in 2023, from 432 million in January to 580 million in December. Bitcoin grew by 33% and Ethereum by around 39%. 

The cryptoasset market is decentralised, meaning it is not controlled by any government or central authority, and transactions are recorded on a network called the blockchain. This type of financial investment is innovative, but it also poses significant challenges and risks, particularly in terms of volatility and security. 

Banco Carregosa, the first choice when it comes to financial investment

Banco Carregosa offers a wide range of financial investment options designed to meet the individual needs and objectives of each and every investor. Our approach is personalised and focused on long-term financial success, with a strong commitment to providing expert advice and innovative solutions to help you achieve your goals. Whether you are a beginner starting to build your portfolio or an experienced investor seeking personalised and professional advice, Banco Carregosa will help you maximise your financial growth potential. Contact us.