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What investment methods are regulated in Chile: how they work and what are the benefits and risks



Are you thinking of starting investing? Mutual funds, property, bonds? Before making a decision, it is important to know which methods are regulated in the Chilean market, what each consists of, what are the risks and benefits associated with each, and recommendations to consider before making a choice. It is important.

Chile has various investment method , for those interested in growing their wealth, from stocks to fortunes. They have their own regulations, strengths and weaknesses that are worth knowing about.

Bonds and mutual funds are the so-called stock market , where companies, governments, and institutions seek to fund projects through intermediaries such as investors and agents and brokers. Any recommendations before choosing?

What investment methods are regulated in Chile?

– action

Shares are a form of ownership in a company. It is publicly sold on financial markets. When you buy stock, you get a small ownership interest in that company. This gives owners certain rights, such as voting at shareholder meetings and receiving dividends.

how do you earn Specifically, the stock is bought at a certain price and hopes to be sold at a higher value after some time.In Chile, the trade is stock exchange regulated by Financial Markets Committee (CMF).

According to the group, invest in stocks you must have a brokerage account and be willing to accept some degree of risk.

– profit potential : Stocks may offer higher returns over the long term compared to other forms of investment such as bonds.

・Partially owned by the company : Buying shares gives you ownership of the company and gives you certain rights and benefits.

-Diversification : It allows you to invest in a variety of companies in different sectors and geographies, helping to de-risk your investment portfolio.

However, there are also disadvantages invest in stocks like that:

– Volatility risk : Values ​​are highly volatile and can fluctuate significantly over short periods of time.

– risk of loss : If the investee company is in trouble, the value of the stock may drop significantly.

– Lack of liquidity : Some stocks can be difficult to sell, especially during times of economic or financial crisis.

– Mutual funds as an investment method

Mutual funds are a form of collective investment Multiple persons invest (fund) a diverse portfolio of stocks, bonds, or other securities through a fund management company.

They are also regulated by the CMF but managed by a mutual fund management company that can buy and sell shares on behalf of its investors.

The advantages of mutual funds are According to the commissionthey find each other:

-Diversification : Mutual funds invest in a variety of securities, allowing you to reduce the risk of your investment portfolio.

-Professional management : Managed by a team of investment professionals with experience and expertise.

– Accessibility : Allows investors of varying levels of experience and budgets to invest in diverse portfolios of securities.

-Liquidity : Easy to buy and sell, so investors can always get their money.

however, Disadvantages of investing in mutual funds like that:

-commission : Mutual funds often charge an annual fee to manage the fund, resulting in a lower return on investment.

-Market risk : Diversification helps reduce risk, but mutual funds are still exposed to market movements.

-Lack of control : Investors do not have direct control over individual securities in their investment portfolio.

– fixed deposit

time deposit It is a regulated investment method in Chile A method in which an investor deposits money in a financial institution such as a bank and exchanges it for a fixed interest rate guaranteed for a certain period of time.

At the end of a period ranging from months to years, the investor can withdraw the money and accrued interest or renew the deposit.

in Chile, time deposit Regulated by the CMF and banking and financial institution supervisors (SBIF). Interest rates are managed as suggested by the central bank.

Advantages of this investment method include:

– low risk : Term deposits are considered low-risk investments as the invested capital is guaranteed and the interest rate is fixed.

– Capital guarantee : According to the Banking Act, the capital is guaranteed up to 75 Unidades de Fomento (UF).

-Liquidity : Some term deposits allow early withdrawal, although they may be subject to penalties.

– Predictable profitability : By setting a fixed interest rate, investors know how much interest they will receive at maturity.

Between Disadvantages of fixed deposit They find each other:

・Profitability is low : Interest rates are usually lower than other risky investments.

-inflexibility : Once the money is invested, the investor cannot withdraw it until the expiry date without incurring penalties.

・Decline in purchasing power : Inflation can reduce the interest earned and the value of the principal invested.

– Bonds, another investment method regulated in Chile

Bonds and financial products They are regulated in the Chilean market, issued as a long-term financing instrument, have a fixed interest rate and usually have fixed payment dates.

he investment method It functions as a type of loan made by an investor to an issuer, such as a corporation or government. In other words, the entity sells the debt on which it later owes interest.

Bonds are regulated in our country. securities market law and its rules which set forth the rules of issuance, negotiation and registration. over it, CMF It supervises and regulates the country’s market.

among the benefits invest in bonds They find each other:

-Cost-effectiveness : Bonds offer fixed or variable returns, depending on the terms of issuance and the market in which they are traded.

– Safety : It is considered a safe investment vehicle as the issuer is obliged to comply with the terms of the issuance agreement.

-Diversification : A way to diversify your investment portfolio by adding a fixed income component.

but, There are also disadvantages as:

-Limited liquidity : It may be difficult to sell immediately if necessary.

・Interest rate depends on risk : The greater the risk or probability of nonpayment perceived by the institution issuing the bond, the greater the interest.

– Real estate as an investment vehicle

Property purchase as an investment vehicle It consists of acquiring property at a price above its original cost for the purpose of gaining income from the lease of the property or from its subsequent sale.

In Chile, this business is governed by civil law and General Law of Urban Planning and Constructionamong other specific laws and regulations.

according to Chilean Construction Chamber (CChC), it is important to know the regulations regarding construction, urban planning, leasing, taxes and property rights before making a real estate investment.

Advantages of investing this way include:

-Cost-effectiveness : Income generated by leasing provides a steady stream of income and capital gains as the asset appreciates over time.
-Diversification : Investing allows you to diversify your investment portfolio and reduce the risk of concentrating capital in a single type of asset.
-Control : Investors are in control of the property’s management and maintenance.

But there are also things like: Disadvantages of real estate investment Yeah like:

・High membership fee : Purchasing real estate may require a large amount of capital, limiting access to this form of investment.
・Vacancy risk : The property may be vacant for a long time, meaning reduced income and increased maintenance costs.
-Additional cost : There are management fees, taxes, insurance, and other costs associated with managing the property.

What are your recommendations before choosing an investment method?

In conclusion, there are several investment methods in Chile to suit different investor profiles, each with their own strengths and weaknesses. Above all, it is important to consider the risk and return factors associated with each method before making a decision.

Before choosing one, the specialized site is business insider We have provided some tips and advice to help people make informed decisions.

– Know your purpose and investment profile : It is important to clarify investment objectives, risk tolerance and time horizon. For example, clarify whether results are expected in the long, medium, or short term.

– Evaluate past and current performance : It is important to analyze the past and current performance of investment methods.

– Analyze risk and volatility : All investments involve risk, but some financial instruments are more volatile than others. It is important to consider these factors when choosing.

– Seek professional advice : It is always helpful to seek the advice of experts in the field. This may be a stockbroker, financial advisor, or investment bank.

– Check news and financial information : Staying informed about news and economic events affecting the markets is fundamental to making financial decisions.

in the meantime, from BloombergThey reminded us that all investments involve risk and that we need to be aware of this when choosing a regulated method in Chile.

It’s also important to take the time necessary to research your options and choose the option that best suits your objectives and investment profile, they report.

Source: Biobiochile

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