You go to the bank of your choice and ask its manager which investment funds he recommends. At this point, he prints a sheet with as many lines and columns as will fit on an A4 sheet and starts talking about investments non-stop, and all you can do is nod your head in agreement. Don’t worry, I can help you evaluate investment funds without making you feel nauseous.

How to analyze an investment fund?

Image 1: Example of blade provided with investment possibilities.

Start with the most important thing, always analyze your investment profile and keep your registration updated. According to the new rules, if the fund is too risky for your profile, it will not be available for you to invest in. Which will reduce the chances of loss.

What is the investment cost?

Then go to the only topic not discussed by your manager: the application cost . When evaluating investment funds , it is essential to understand the fees involved, such as the management fee, performance fee, load fee , etc. As they will affect your returns significantly. Generally the costs are on the last page in small print. That's where you start, understanding how much it costs you to invest.

What is the investment risk?

Before thinking about income , think about the security and risk of the investment . Therefore, assess the risk . Investment funds must provide a degree of risk that varies from 1 to 5, with 1 being the least risky and 5 being the most risky. Search for key words like leveraged fund, derivatives, headge fund. The rule is this: the less you understand the terms, the less suitable the investment fund is for you. Highlight those that you were able to clearly understand where they invest .

Evaluate the Return on Investments only after having verified the risk.

Evaluate the performance . At this point, it is important to check whether the long-term return , over 5 years, is in line with your expectations. For example, s and you expect gains of about 15% per year and find a fund that has historically only had returns of 6% per year, the chances of you being frustrated with this investment are high. Just because you become a shareholder does not mean that your income will appear overnight. Therefore, make an assessment of what you expect and what the fund has been yielding.

Time of Existence of the Investment Fund.

The rule is very simple, avoid investment funds with less than 5 years of existence, as the risk you run is inversely proportional to the time of existence. Older investment funds already have a more reliable Track Record.

In short, start by defining your investment profile to ensure adequate funds are available to you. Then focus on costs, checking the fees involved and discarding those with abusive fees . Pay attention to the risk of funds and discard those you do not understand. Only then, check if the historical performance is in line with what you expect. With that, I hope you have found a good investment fund that will bring you the financial freedom you dreamed of.

I didn't find any available investments. What to do?

If evaluating investment funds seems like a challenge and you are looking for specialized investment advice to take your investments to the next level, contact analyst Wagner Geremia.

Image: Unsplash / Cookie_studio

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