{"id":22808,"date":"2008-03-31T21:15:00","date_gmt":"2008-03-31T21:15:00","guid":{"rendered":"https:\/\/clusterfamilyoffice.com\/blog\/?p=527"},"modified":"2008-03-31T21:15:00","modified_gmt":"2008-03-31T21:15:00","slug":"la-trinchera-del-deposito-bancario","status":"publish","type":"post","link":"https:\/\/clusterfamilyoffice.com\/en\/la-trinchera-del-deposito-bancario\/","title":{"rendered":"The bank vault."},"content":{"rendered":"
As we have pointed out on previous occasions, the considerations we are about to set out below relate to an average investor profile with average financial capacity and a low or medium-low level of financial literacy \u2013 in other words, the majority of the population who have sufficient purchasing power to consider investing beyond simply making ends meet at the end of each month. Naturally, many readers will far exceed this average profile in terms of assets and\/or knowledge, and should not feel that this applies to them. Having said that, let us get down to business.<\/div>\n
\"\"<\/a>Small savers and investors \u2013 whether they are employees or budding small business owners \u2013 do not appear to be being hit quite as hard by the cuts to their investments as medium-sized investors, as we shall see in this post. Perhaps this is because, following a logical strategy, investors with only a few tens of thousands of euros \u2013 or even a few hundred \u2013 have focused mainly on equities, and more specifically on the Spanish and European stock markets. This segment has, of course, suffered significant capital losses, but generally speaking he has not lost anything that he was not prepared to risk<\/span>. In other words, they were still (or felt they were) far from having a sum that they ought to have set aside in fixed-income securities or guaranteed instruments that were not susceptible to the volatility traditionally inherent in the stock markets. Consequently, with a few notable exceptions who have correctly predicted the direction of the markets and have also been making gains in the equity markets over the last six months, the majority of small investors and savers are suffering losses commensurate with the volatility and declines in Spanish and European equities. This represents the logical evolution of risky assets to which bearish or unstable markets have accustomed us over the last fifty years. So far, unfortunately, this is business as usual.<\/p>\n

However, the average investor \u2013 and here we are referring to those with total assets of between half a million and two million euros, including property and businesses \u2013 is the segment hardest hit by the current economic crisis. At least, that is what we have been observing from the enquiries we receive on this blog, and also from our contacts with potential clients of our family office, whom we have been dealing with since before Christmas and, in particular, since the start of 2008.<\/p>\n

\"\"<\/a>Indeed, this credit crisis has unexpectedly decimated the wealth of those who were already using more sophisticated investment products \u2013 such as fixed-income, mixed or alternative funds, or structured products of all kinds, to name but a few \u2013 to protect a large proportion of their assets. Financial products developed by financos<\/a> with underlying assets often linked in one way or another to debt and fixed-income securitisations with astronomical ratings. In these cases, the spirit and intention behind the investment was simply to forego substantial capital gains in exchange for significant protection of the principal. The outcome of these investments in recent months has been disastrous, judging by the feedback we have received via our blog and from new clients. But this is not only in terms of the percentage of losses but also in terms of the financial damage they have caused their owners. Losses on fixed-income or conservative investments were not part of the plan for these average investors, who believed their assets were seemingly shielded from all risk. And although many will recover over time, the natural reaction of many who have seen the value of what they could not afford to risk diminish is, regrettably but understandably, to realise their losses and retreat to bank deposits. Understandable, but not always advisable.<\/p>\n

Indeed, the current credit crisis is leading many investors who wanted to safeguard their wealth to offload loss-making fixed-income positions and seek refuge in bank deposits. They are even regarding the immediate taxation of dividends as the lesser of two evils (sic)! But although it may be difficult to grasp in these bitter times of unprecedented losses, there is life beyond the credit crisis and there is life beyond loss-making mixed and money market funds, or freezers<\/a> money. In line with the strategy of seeking opportunities in times of crisis, we can currently find investment instruments in non-financial corporate debt offering very attractive yields. The credit spread<\/a> The decline experienced by some companies due to a lack of confidence in the current market and the market\u2019s lack of liquidity presents an investment opportunity over a 5- or 10-year horizon, looking ahead to the maturity of certain issues.<\/p>\n

\"\"<\/a>Investment losses \u2013 which were never intended to put vital parts of a person\u2019s assets at risk \u2013 have caused a great deal of harm to their owners, and we receive many desperate enquiries on this matter. It is true that the current credit crisis has been a real Black Swan<\/a> , but it is also true that, in recent times, the risk classification of financial products has been rather arbitrary. Financial products with radical equity exposure (emerging markets) exceeding 30% were (and continue to be) labelled as \u00abconservative mixed\u00bb products. We have also dealt with desperate enquiries from clients with portfolios containing high-yield fixed income and emerging market assets as part of their wealth protection strategy. Paradoxically, we are seeing most of the problems in various mortgage securitisations (which are indecipherable even to the manager or seller themselves) that were supposed to provide not only a return on the principal but also an income stream which has now been severely reduced, with the resulting family problems that this entails.<\/p>\n

\"\"<\/a>In short, the volatility of fixed-income financial products has surpassed that of some equities, turning countless reckless \u2013 and even some more prudent \u2013 wealth management strategies on their head. These were strategies designed solely in the interests of the banks and financial institutions trusted by clients, who are now desperately seeking a wealth assessment and remedial advice through consultations and interviews. We do not always have a miracle cure \u2013 far from it. As a pulmonologist once said to a friend of mine, a heavy smoker who gave up five years ago: \u00abThe damage is already done.\u00bb It will take many years for some portfolios to recover from the damage suffered over the last nine months.<\/p>\n

Let us, therefore, come to terms with our new financial situation, adapt to the new reality of this crisis and plan for the future by learning from the mistakes of the very recent past. Let us not fall into the common trap of lurching from one strategic move to another, which prevents us from identifying the opportunities that every crisis presents. Only in this way will we manage to get our financial course back on track, at least until we face another Black Swan. Fortunately, swans are almost always white, and we must know how to navigate correctly amongst them.<\/div>","protected":false},"excerpt":{"rendered":"

Como ya hemos advertido en otras ocasiones, las reflexiones que vamos a hacer a continuaci\u00f3n se refieren a un perfil de inversor medio con capacidad media y preparaci\u00f3n para el mundo financiero baja o media-baja, o sea la mayor\u00eda de la poblaci\u00f3n que tenga poder adquisitivo suficiente para pensar en invertir m\u00e1s all\u00e1 de llegar […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[],"class_list":["post-22808","post","type-post","status-publish","format-standard","hentry","category-sin-categorizar"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/22808","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=22808"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/22808\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=22808"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=22808"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=22808"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}