When we consult information and analysis about something delicate like investing, we find that the decisions are based on equities (stocks) or fixed income (bonds). People seem to opt for one of two ways, ignoring the possibilities of incorporating the two. Precisely for this reason we found very interesting to emphasize the flexible funds.
To clearly explain what a flexible fund is we will use the metaphor of a football team as the template of a team where the various players or players balance each other. And as flexible funds, football teams are balanced in terms of strikers and defenders.
Imagine flexible funds in football terms. We feel successful if we understand that this comparison be closely fitted: a template defenses must be included to provide reliability and security equipment; midfielders who operate the equipment, and finally strikers who can finish the plays, scoring goals. Thus, with balance could increase efficiency and performance. The same applies to flexible funds. The solution is that the team works in all facets of the game, and flexible funds, where shares and bonds for a combination achieved greater efficiency depending on the timing of the market.
What would a football team in the 11 strikers were players like Messi or Cristiano Ronaldo?
There would be no doubt that scoring ability would be great, but due to their low defensive potential, would also fit enough goals. It is what happens if we have a portfolio made only by stocks. We can earn more than with fixed income, but also experience big losses when markets turn bearish.
Moreover, what if the team had only defenses?
We would find a very reliable alignment in front of our goal keeper, that would surely fit very few goals, but it would be very complex to have the ability to score a goal, because of the small attacking power. This is what would happen if we had a fixed income portfolio: profitability would be safe, but really low.
The coach or trainer as support for the team
The results often depend on the right decisions. When making changes, when to change the strategy, how to perform rotations … they are questions that can change the course of the game. In the flexible funds the work of the coach makes the fund manager, responsible for carrying out specific and dynamic changes according to the state of the markets.
You can find the best flexible funds to invest in the Morningstar.com website, where all financial products are rated and deeply explained and analised.
So basically our conclusion with all this scenario is that we need to run out of the fixed income products. Due to the imminent rise of the national interest rates by the ECB and the Federal Reserve… the markets are reacting to these future events now. Stocks can be a refuge for many of these funds, but national debt and high rated private debt is more likely to absorb the most conservative investors.