One of the main rules of successful investing is the distribution of capital between different asset classes. The better your portfolio is diversified, the more protected you are from unexpected market fluctuations.
The use of foreign currency financial instruments in addition to ruble ones solves two problems at once. On the one hand, you can invest in attractive assets in any region of the world, on the other hand, you can reduce the risks associated with the volatility of the ruble.
What proportion between currencies will be optimal? It depends, first of all, on the goals of accumulation. If you are considering building a long-term savings portfolio, then in practice they use the following approach: 50% – investments in rubles, 50% – in dollars and euros.
Last year pleased investors - stock markets grew by 15-30%. In 2021, there are prerequisites for maintaining positive dynamics. Favorable factors include the soft monetary policy of global central banks and the warming in trade relations between America and China. Along with this, risks include uncertainty around the US presidential election and the consequences of the outbreak of the new coronavirus.
To obtain high investment results, choose instruments with the optimal balance of risk and return for you. Keep track of key events in politics and economics and remember the rule of diversification.
Opening a deposit account in a bank
The second investment option. A foreign currency deposit in a banking organization is presented with a low rate of return, since inflation in Western countries is low and Central Bank rates in these countries are lower than in Russia. There is a minimum return on the deposit, plus it is more difficult to reach the money. Minuses:
- ignorance of what will happen to the Russian Federation in the near future. Don't forget about sanctions;
- Domestic banks' access to foreign exchange turnover may be limited. This is something that businessmen in power can quite realistically take advantage of.
Gold
The main purpose of investing in precious metals is to protect against inflation. Gold prices are calculated in dollars.
I invest in metal, we also hedge currency risks. From the devaluation of the ruble.
Additionally, we have some kind of historical increase in the cost of gold. Approximately 2-3% higher than the inflation rate.
Where to buy gold:
- impersonal metal accounts:
- purchasing bullion or bullion coins;
- as part of a gold fund (again ETF).
The main feature of investing in gold is its low correlation with other assets. Simply put, when everything starts to fall (for example during a crisis), gold prices usually start to rise. Many are looking for a “safe haven” where they can put money and wait out turbulent times.
And the “eternal metal” in the form of gold comes first.
The easiest way to buy gold is to open impersonal metal accounts. Here you need to pay attention to the size of the spread (the difference between buying and selling). Different banks have a wide spread. I have come across quotes with a spread of 12-15%. Just tough.
Before opening compulsory medical insurance, it is better to first analyze the banks’ offers and choose the one with the smallest spread. Not in absolute, but in relative terms. How to calculate the spread is briefly described in this article.
Brokerage account
This is a mistake many practicing traders make. The bottom line is that a market participant buys currency through a company and stores it in the company’s account. This is not the best decision. Transactions were carried out at a favorable rate, it was possible to save money, the currency was purchased, and then it ends up on deposit with the broker. You need to be careful because, unlike funds in a bank, money here is not insured. In force majeure situations, there is a risk that the money will not be returned to you. We change the currency on the exchange, then withdraw or invest in other instruments.
Before we begin to consider traditional exchange instruments, something should be said about fake investments in currencies. Scammers who use different methods to attract money: invest a couple of hundred dollars, in return you will receive a 300% return per month. These are financial pyramids, binary options. It is always necessary to check whether the people offering such services have a license to carry out asset management activities and provide brokerage services.
By investment
For an investor who is on the verge of choosing instruments to form his portfolio, the pressing question is how much needs to be invested so that passive income, at least in a couple of years, will be 100,000 rubles per month. Let's go from the opposite: 100 thousand rubles is 10% of 1 million rubles, that is, on average, this is the amount that should be invested in different instruments so that the profit on them per month reaches 10%, and per year it is 120 %.
It is extremely important to remind about portfolio diversification: use deposits, online deposits, shares, Eurobonds, investments in real business or real estate to not only build a portfolio, taking into account the declared income, but also reduce risks.
Popular investment instruments in 2021 with a small start
| Tool | Declared profitability, % | Minimum start, rub |
| Bank deposit | 5 | 1000 |
| MFO, P2P lending | 15 | 1000 |
I propose to study what exactly you can find on the market today if you have from 30 thousand to 1 million free funds in your wallet.
From 30,000 rubles
Reading an investment or financial forum where recommendations are given by analysts, you can come across the following popular options for investing money:
- Bank deposit;
- purchase of shares and further trading;
- mutual funds;
- ETF funds.
And an online project with loyal starts would be perfect.
From 50,000 rubles
To the portfolio described above, I would advise adding Eurobonds, both from Russian and foreign companies. And investing in business allows you to earn income. On average, you can find options for equity participation in opening a flower shop or beauty salon from 10 thousand rubles. Don’t rule out investing in your development so that you can then use the accumulated knowledge to earn money - foreign language courses, manicure, soap making.
From 100,000 rubles
With such an amount, even more opportunities appear, and in addition to the options mentioned above, I recommend buying foreign currency, waiting for it to fall. Judging by world politics and the instability of the ruble, it will only fall. Having bought dollars or euros, put it into a bank deposit or part of it into online projects. This will be an excellent opportunity to protect yourself from inflation.
From 500,000 rubles
Such amounts should be divided into several options and the emphasis should be on startups or real businesses. And if you have long wanted to do something of your own, it’s time to start with such investments, with a special emphasis on working in the Internet segment - online stores, delivery, development of paid tests, development or training programs, which is highly demanded in the current conditions of the information business . In the future, you can apply for budget investments, a kind of assistance from the state.
From 1,000,000 rubles
It would seem that this is a huge amount, but it is not enough for a full-fledged investment in real estate, unless somewhere in the outback. But working with securities, Eurobonds, precious metals, deposits, online projects and startups is an excellent solution. I would recommend collecting 5-7 instruments, and in choosing them, pay attention not only to profit, but to the terms and conditions for payment of profit.
In this article, I presented for you popular ways of where to invest money in 2021 in such a way as not to lose, and in creating a list of suggestions, I referred to my own experience and expert advice. Popular options for investing in business include companies specializing in software development, software, virtual reality, artificial intelligence and blockchain. But I would refrain from deposits in rubles taking into account inflation and profitability.
Summarizing everything that is said in the article, let me remind you of the importance of weighing risks and profits, selecting instruments that pay regularly, because, you see, it is convenient when profits come every month, or even more often. I wish you all the right investments and good income.
Author Ganesa K.
A professional investor with 5 years of experience working with various financial instruments, runs his own blog and advises investors. Own effective methods and information support for investments.
Eurobonds
The first tool we will consider. Suitable for those who are wondering where to invest euros. Securities issued in the currency of the issuer's country are not always denominated in euros.
Eurobonds offer higher returns than deposits. They are considered a reliable instrument, since Eurobonds are issued by the state or large companies, which are formally stable. Regarding risks, if you buy bonds for a long term, it is usually true that the investor is exposed to the risk of changes in interest rates. We bought an asset, the Central Bank raises the interest rate, which means that more profitable investments appear in the economy, since the profitability is pulled up by the Central Bank rate. The asset was purchased at a bad time, when rates were low, and it turns out that no one is interested in the bond. As a result, the value of the bond on the stock exchange may fall and selling it may be problematic.
A number of Eurobonds are traded on the Moscow Exchange, some of them have a high price, so the assets are inaccessible to the average investor. In certain cases, an adequate entry threshold is presented, in the region of 1-2 thousand dollars. The yield on Eurobonds fluctuates in the range of 4-6% per annum in foreign currency.
Formation of a multi-currency basket
A multi-currency basket consists of three or more international currencies. Such storage of money has its pros and cons, but the main objective of investing in currency is to preserve capital and minimize risks during crises and high volatility in the markets.
The basis of the basket is the US dollar - approximately 50% with minor changes, depending on the situation. Also, about 25 percent should be in eurocurrency. A tenth is allocated to the Chinese yuan. The remainder of the basket is formed from the currencies of other countries. Their set depends on the international situation, as well as the chosen system and investment strategy in the foreign exchange market.
First of all, you should pay attention to such stable currencies as Swiss francs, Danish, Norwegian or Swedish crowns.
You can take a closer look at Australia and New Zealand, which are export-oriented, and the currencies of these countries look reliable.
Shares of foreign companies
Eurobonds belong to the category of conservative financial instruments, the yield is higher than that of a deposit. If the required profitability is unlimited, you need to take on the risk. Profit without risk – two parallel ones. Now we will talk about where to invest dollars and euros other than bonds.
If you are not a professional, it is difficult to choose stocks that can provide high profitability. If you plan to invest a lot of money, you want security. In the absence of proper experience and knowledge, it is difficult to predict where the quotes of even the largest companies in the world will move.
A thorough analysis requires:
- qualifications;
- time.
If you are ready to take risks and explore a new direction, invest in stocks. If you are a beginner, there is a desire to start with clear things and easy tools - ETFs.
mutual fund
Are investments in mutual funds profitable? With correction. Investing in American stocks and other dollar assets.
The very idea of creating mutual funds is simply magnificent. Investors' money is collected by selling fund shares. Next, the money is invested in stocks, bonds, real estate (according to the fund’s strategy).
The fund makes a profit - the value of the share increases. Investors are getting rich. Not by days, but by hours. ))))
Several questions are immediately resolved:
- wide diversification;
- the fund managers do everything;
- simplicity and accessibility of purchase - I came, I saw, I bought. For starters, 100-200 bucks will be enough.
What issue still needs to be addressed?
Probably: how much can you earn?
Wrong. The initial question that should concern you is how much will it cost me? More precisely, what expenses and commissions will need to be paid for management?
There are “only” three of them:
- Purchase fee - 1-1.5%.
- The annual commission is 4-5% of the amount of your assets.
- Sales fee - from zero to 1.5% (depending on the tenure).
Roughly speaking, you will pay half (and in fact much more) of the profit to the managers. And the most interesting thing is that the mutual fund will take the money from you in any case. Did you make a profit or make a loss? Subtract the amount of commissions from this. And get a net financial result in the form of profit...... Will there be a profit?
Roughly speaking. You have $1,000. You bought all the fund's shares in American stocks. Over 1 year the growth was 10%. You decide to take profit and sell everything.
Question. How much money will you receive?
Quick answer : $1,100.
Correct answer:
When purchasing a share, you were immediately charged a 1% commission or $10. $990 left.
Profit 10% from 990 dollars - 99 bucks. Total - $1089.
This amount will cost 5% for management or 55 bucks. That leaves $1,034.
Well, a “control shot in the head” - another 1% for the sale of a share - 10 bucks.
You will receive $1024 in your hands. Your profit is 2.4%. Great result.
In fact, you still need to deduct 13% taxes from this. And the profit will be even less.
Over an interval of several years, the commission will not have such a strong impact on the level of income. But still very, very significant.
This is the arithmetic.
ETF in currency
These are exchange traded funds. Funds that invest in a specific set of securities. You can purchase ETFs in foreign currency through Interactive Brokers or through a Russian broker on the Moscow Exchange. There are many options you can buy market related ETFs:
- USA;
- Germany;
- Norway, etc.
There are companies that provide the opportunity to buy ETFs directly in foreign currency; check with your broker to see if this service is available.
ETF funds for Eurobonds and riskier funds for stocks are considered the most reliable. We need to mix the portfolio and build the ratio of risky and safe assets in the required proportion.
IPO
One of the most risky and potentially highly profitable instruments is an IPO. This is the company's initial public offering on the stock exchange. An investor can earn several tens or hundreds of percent per annum, but there is always a high risk of losing capital.
In Russia, a small number of companies go to IPO (1-2 per year). In the American market, there are several dozen initial offerings a year. Therefore, Russian investors focus on it.
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Access to this risky market is limited. Most Russian brokers give it only to qualified investors. Until recently, the most popular Freedom Finance worked with everyone, now only professionals have access.
The main advantage of the instrument is high profitability with correctly selected assets. More cons:
- risk of losing a significant part of capital;
- the need to obtain the status of a qualified investor;
- presence of a brokerage account;
- lock-up period during which shares should not be sold;
- allocation, when the investor’s share of participation in the placement is limited;
- high brokerage commissions.
What to choose?
First of all, you need to take into account your goals and investment timing. Regarding currency instruments, the situation is as follows - if the term is 1-2 years, you can choose a financial cushion in the form of cash, or a deposit in foreign currency (choose a private bank rather than a state bank). Also check out short maturity Eurobonds and Eurobond ETFs.
If the investment period is impressive, a portfolio is being built for 5, 10 or 15 years, then you can add more shares to the portfolio. Stock ETFs are suitable if you don’t have time for analysis. You can buy shares of foreign organizations. Remember, one of the rules of professional investors is that the longer the period for investing funds, the more shares there are in the investment portfolio. This is due to the fact that shares are likely to rise in the long term. In the short term, it is difficult to say exactly what will happen to the stock.
Bonds for Conservatives
The coronavirus outbreak in China at the beginning of 2021 reminded investors to be careful when choosing an investment strategy. To avoid unnecessary risks, it is better to form a portfolio with reliable assets.
Most likely, the preferred placement currency may be the US dollar, which is unlikely to suffer in the event of a shock scenario or crisis.
The best thing to do in 2021 is to choose the least risky products for your portfolio. For example, these could be dollar bonds.
When choosing bonds, the focus from the “yield” criterion should be shifted to the categories “duration”* and the reliability of the issuer. Duration helps investors understand the average return on an investment.
Due to the ambiguous geopolitical situation, when compiling a portfolio, it is best to give preference to a balanced approach, that is, have bonds with different maturities in the portfolio.
REIT
These are shares of real estate investment funds. Technically, these are the same shares, but they have a number of features:
- high dividends – REITs must pay out at least 95% of profits in the form of dividends;
- dependence on real estate prices;
- low price growth – REIT is more about dividends than about stock growth.
It is necessary to carefully select suitable funds so as not to buy a “dummy”, seduced by high payments. Look at what assets the fund owns, how it makes profit, and what the risks are. And only then buy.
By the way, you can invest in European real estate directly by buying it in euros. But this is expensive and often unprofitable. Especially if you do not live in Europe, but act through an intermediary. REITs are much easier to buy.
Historical returns
I made a small table comparing past returns for different periods. As a calculation, I used the index that tracks the FXFA ETF, and for VTBH, a foreign fund whose shares are resold by VTB.
In theory, it is necessary to minus the commissions of the funds themselves, but I decided not to do this. The difference in profitability is too obvious.
The profitability consists of coupons and price growth. The strong growth performance over the past year comes from a low base, with virtually all bonds (and especially high-yield bonds) falling by tens of percentage points in the spring of 2021. The restoration to previous levels gave such a large (double-digit) profitability in just a year.
| Period | FXFA (benchmark index) | VTBH (foreign ETF) |
| Total return, % | ||
| 1 year | 27 | 19.9 |
| 3 years | 28 | 18,4 |
| 5 years | 48,5 | 38,2 |
| 10 years (from January 2012) | 95 | 63 |
Why is there such a big gap in returns? Are both funds investing in junk bonds?
I see two main reasons:
- Through an active strategy (fallen angel bonds), FXFA takes advantage of market inefficiencies and receives some additional profitability.
- Recently there has been a decrease in interest rates. And due to the higher duration of the portfolio, the FXFA ETF received the greatest benefit.
Risk diversification
Diversification is the division of your capital into different areas. Applying this technique is the cornerstone of smart investing, since a financial expert will never keep capital in 1-2 assets. He will divide it between at least 10 - so that the decrease in one financial instrument does not lead to a loss of overall profitability.
It is advisable to compose an investment portfolio so that it includes assets that are not interrelated or have different degrees of risk. For example, you can invest part of your funds in bonds, where the risks are extremely low, and invest the remaining money in stocks, where the risk-to-reward ratio is much higher. If investments in some stocks turn out to be a loss, then they will be partially covered by the profit from bonds - the resulting losses will be lower than they could be.
An example of a possible investment portfolio.
Why is the US dollar preferable for investment?
Foreign currency has been steadily gaining popularity in our country since the 1990s, but now things are not so simple.
There are four leading and most popular currencies in the world:
- U.S;
- Euro;
- English pound;
- Japanese yen.
However, you should not rush to go to the exchange office and buy any currency from the list there. Among professional investors, the American dollar is considered the most worthy option for saving money; other currencies are more suitable as a speculative instrument.
The dollar is the main means of payment in the world economy. And there is no need to fear its sharp decline or loss of purchasing power in the near future. None of the world's largest financial players are interested in this.
Accordingly, ordinary citizens can almost guarantee saving and increasing their money.
Quality of papers
The basis of the FXFA fund's strategy is to buy bonds that have lost their investment rating, but have not fallen very far. Literally one step below the investment rating boundary. Namely, not lower than BB.
Why is this so important?
When a credit rating is lowered, the risks increase that the issuer will not be able to pay its obligations. Balancing on the brink - FXFA receives increased profitability (as a risk premium), but at the same time does not take obvious garbage into the portfolio.
FXFA Loan Portfolio Quality.
What's inside VTBH?
The basis is the same - BB class paper (72%). But almost a quarter of the capital is invested in super junk B and CCC bonds.
Credit quality of VTBH fund bonds
VTBH has a riskier portfolio. In simple terms, including a lot of junk. And most likely, some issuers are constantly defaulting on bonds. But due to the simply huge number of different issues, this is not very critical for the entire portfolio.
