14 April 2023

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Protect yourself first with investments

Luigi Campopiano

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Knowing what is behind the management of assets and capital makes savers and investors more relaxed and less afraid of risk. Knowledge makes the vision of the future clearer, and any surprises that are no longer unexpected but predictable are manageable in advance with specific strategies. Knowing the basic gears through which our money moves is of fundamental importance on this journey.

Before deciding to allocate savings to any investment, the basic principle is the protection of assets, an essential prerequisite for being able to face any strategy. The aim is to opt for pure, low-risk investments to keep pace with inflation while keeping the purchasing power of our money unchanged.

When intending to invest capital, the first question is: "What purpose do I want to achieve?" 

Investing blindly is like playing the lotto. Even if you can afford to lose certain amounts, it is not the correct approach to take. Once the goal or goals are defined, you should analyze the propensity for risk, what the saver believes is the most appropriate decision for their standard of living considering their financial and daily life commitments. Following these two suggestions means entering the protection perspective because there is no profit without it.

It is useful to reiterate that there is no risk-free investment and no low-risk investments that generate high profits. Repeating this concept gets us used to thinking correctly and not being dazzled by easy or safe money: the psychological component is fundamental when thinking in the financial sphere and considering one's assets.

On these solid foundations, a path can be built by implementing the most suitable strategy for one's purposes, preferably working in concert with an expert consultant who has the task of helping to understand which solution is best suited to one's case.

Another factor to consider is time, both in terms of the duration of the investment and when to enter the markets. About 80% of the profits generated by investments have the characteristic of entering the markets at the right time, the best moment considering our needs and the level of the markets.

The time factor can be overcome by subscribing to accumulation plans: constant purchases of a certain financial product at a fixed frequency, which balance and mediate prices, making market volatility less impactful. This is ideal for a medium-long investment duration.

A suggestion for the duration of an investment: it is linked to your needs and the type of instrument you decide to subscribe to. The most attractive returns are obtained by mentally tying the capital. In case of sudden necessities, to avoid disinvestment losses, it is good to also diversify on various financial instruments — funds, shares, bonds, exchange traded funds, certificates, policies — and not only on sectors.