Has mentioned in the launching of our first contract as advisors, the SICAV - Optimize Invest Selection is a balanced fund portfolio oriented for long-term savings composed of equity funds and bond funds.
It is exposed to shares from the Eurozone countries; Switzerland; Sweden; Russia; United Kingdom; Japan and Canada.
The fund bears to European High Yield, US Dollar, American High Yield, Norwegian Krone, Swedish Krona and Japanese Yen in the bond component.
We will illustrate each block separately using the geographical criterion of investment allocation in the following articles starting with the Eurozone, where we have investments via stock and bond instruments.
Eurozone perspectives
After a robust recovery in the third quarter, the pandemic's resurgence severely penalised the Eurozone economy in the last quarter of the year. According to the IMF, Eurozone's GDP is estimated to have declined by 7.2% in 2020 and to recover by 4.2% in 2021. However, the prospect of mass vaccination throughout 2021 supports the economy long-term growth' rescuing scenario alive till the end of the year.
Knowing of the difficulties, the European Central Bank (ECB) kept interest rates unchanged. Still, it strengthened the plan to purchase financial assets and increased the amounts and deadlines of funding programs to governments and banks, allowing lower financing costs.
The stimulus package from the Recovery Fund has been finally approved. It will mobilise EUR 750 billion from summer/autumn 2021 for direct transfers to the neediest countries, an important measure to complement states' efforts.
Medium-term inflation forecasts remain very low and are far from the ECB's target. This will allow a very accommodative monetary policy to be maintained for some time.
All in all, to support the recovery in the short run, national fiscal policies are assumed to be complemented by accommodative monetary policy through the closing of 2025. While the continued duty support will translate into more significant deficits, the supposed monetary accommodation, ease of financial conditions, simplifies public deficit financing and reinforces the fiscal measures on activity.
Strategic allocation
In terms of geographical area, the Eurozone counts as 25% of our consultancy exercise's recommended portfolio. The euro-area stock exchanges with lower valuations in recent months remain relatively attractive and less risky than other geographies. The portfolio consists of 10% investment/mutual funds (see definition below) or ETFs of Eurozone shares.
In turn, government bonds in euros also represent an exciting diversification into more defensive or moderate profiles, such as the portfolio. We combine this position with high yield bonds, which are more profitable but riskier for the remainder. The portfolio consists of 15% Eurozone investment funds or bond ETFs: 10% in bonds euro and 5% in high yield bonds in euro.
To better understand our portfolio of funds or ETFs of shares and bonds, read chapter 4 of our Money Framework series. We also made a video resuming the various steps on how to manage the cycle of the income, savings and investments.
When Euroconsumers Invest was born in June 2020, we presented ourselves with a clear purpose and well-defined objective: EUROCONSUMERS INVEST is a new Business to Business approach with a Business to Consumer DNA. We work with all entities and organisations that want to contribute to a more sustainable Financial market and empower all citizens.
The objective is to carry information and advice, through companies, that would reach the most significant number of consumers.
Consumer organisations' experience is clear: there is a long way to help citizens' financial literacy. In this sense, we disseminate the way we operate, and the foundation of our analyses delivered to our partners.
Definitions:
- Mutual fund
A mutual fund is a professionally managed financial product – investment fund - that gathers money from many investors to buy securities: bonds, share or both. The advantage of this product compared to direct investment - direct purchase of shares or bonds - is that by joining many investors, the amounts available to invest increase considerably, which reduces costs and diversifies the investment (a more significant number of securities purchased). This option is the most recommended for those who do not have much money (tens of euros are enough to invest), time to monitor the investment daily (let fund managers do this for you), and little knowledge of the financial markets.
- ETFs
An exchange-traded fund is an investment fund traded on the Stock Exchange as if it were a stock. An ETF can also be called an index fund. Most ETFs track an index, such as a stock index or bond index.