One of the most affected regions in the world by the COVID-19 pandemic has been Latin America and Colombia one of the most affected countries. In 2021 the Colombian peso has experienced historical levels of devaluation, even new negative records are feared. Despite the relative recovery of the economy, worrying levels of unemployment persist, especially among women and young people.
The worst that could happen is the loss of independence of Banco de la República with the recent changes in its Board of Directors. Although the new members have an impeccable academic background from prestigious educational institutions, many analysts believe that they do not yet have the necessary experience to occupy a position with so many responsibilities. There is nervousness among experts about the possibility that the Executive influences some decisions of the issuer. Given this reality, the solution is to diversify the options: the CDT’s have almost a negative profitability and not to mention leaving the money under the mattress.
Those are the reasons to look for new investment options, whether to increase your wealth, protect you from inflation or diversify your sources of income. Traditional banks do not offer savings accounts in dollars, but applications such as Airtm, popular among freelancers to receive their payment and can even make transactions in USD or cryptocurrencies, or the famous PayPal, have already arrived in the country. But if you have a more conservative profile these are some options:
1. Buy dollars in exchange houses: it is the easiest, but not the best. The trick is to buy them when they are cheap and sell them when they are expensive. The perception of most Latinos is that the dollar is always on the rise, something that is not necessarily true in all cases. Of course, dollars under the mattress are infinitely better than Colombian pesos under the mattress.
Specifically in the coffee country, there are two peaks of the price of the dollar between 2.016 and 2.020. In those years it has fluctuated constantly and in some periods it has had a downward trend. That is, profitability has been lower compared to other financial products. In addition, it would be exposed to the ups and downs of the world economy, Federal Reserve policies and inflation without any real mechanism to protect its savings.
2. Investment funds: they are different products that banks or financial institutions have. They offer protection against inflation and profitability depends on your risk profile. There is a wide variety in the market in financial institutions such as Skandia, Davivienda, Bancolombia, etc. The important thing is to consult with each institution, compare returns and analyze which is the best option for you. Investing time in knowing the market and its possibilities will save you headaches in the future.
3. Voluntary pension funds: not many Colombians know about them. They are voluntary contributions to complete either pension or planned savings. In Colombia they have several tax benefits such as lowering the withholding tax at the source if up to 30% of the salary is invested as long as it is done from the payroll, is exempt income below certain ceilings and does not pay 4×1,000.
They also have a diversified portfolio and not all are mandatory. The most popular plans are Protección, Provenir, Dafuturo, Skandia, and Colfondos. The key, as always, is to take the time to analyze all the possibilities, compare them and know what suits you according to your profile and personal goals.
4. Exchange Traded Funds: known in Spanish as stock exchange funds are a set of different assets such as stocks, bonds or commodities in a single package. The attractions are several: time can be invested in different institutions, large amounts of money are not necessary, administrative costs are low, the risk is lower than in other products, they can be sold at any time and can be used as long-term investments.
The two possibilities existing in the Colombian Stock Exchange are: iColcap that provides an income similar to that of COLCAP given only by the twenty most liquid shares in the market; Hcolsel replicates the performance of the Colombia Select S&P index and is also fully transparent and focused on diversifying investment; iColrisk aims to replicate the performance of the MSCI All Colombia Local Listed Risk Weighted Index.
5. Investment platforms: their great advantage is the democratization of access to the financial market and making it available to everyone. Many knew them from the Reddit vs Wall Street fight by avoiding the purchase of more GameStop shares. One of the most popular apps is Robinhood that rose to fame when the leak of information to more powerful players was known. His image was beaten after the fight.
Fortunately there are more applications such as Tyba, Ualet, Mesfix, A2enso, SeSocio, Unergy, Binance, Trii, eToro, Protección and Hapi all available in Colombia. There are several tutorials on the web about usage, entry conditions, profitability, etc. The key is to take the time to get to know each one, know if they adapt to your needs and above all not invest in speculative stocks. And don’t forget Warren Buffet’s maxim: “the bag is a mechanism for transferring money from the impatient to the patient.”
6. Real Estate: whatever happens, investing in property will always be the safest in the market. And what better if you can rent in dollars. The real estate market of Miami, Orlando and South Florida is increasingly attractive with the added advantage of geographical proximity to Colombia and cultural similarity thanks to Latino immigration. There are properties for every investor profile and pocket, the important thing is to be well advised.
Investing in real estate is still the safest choice where to put your wealth, but not the best if you want to increase it. During the last years the valuation of Colombian properties does not exceed 7% in almost any region, something very poor compared to Miami where the annual capital gain is on average at 15%.
The continuing advantages of the sun capital continue. Bank rates do not exceed 5% effective annually and the superiority of the US banking system is well known. The Colombian rental fee does not exceed 0.5% of the total value of the property, and it is necessary to add maintenance expenses, commissions, taxes and insurance. On the other hand, in Miami the properties can be paid for alone with the value of the rent.
Finally, it is important to highlight the cultural differences of each country. There are many tenants in Colombia who deliberately decide not to comply with their obligations taking advantage of the lax laws in this regard. Miamians, on the other hand, are respectful of the law and responsible with their obligations, added to the fact of having a little permissive legislation with delinquent tenants.
As we can see there are multiple investment options in dollars for the Colombian market. And among all of them the safest is the real estate in Florida. At PSF Realty we are here to advise you.
In PFS Realty Group given our real estate activity we are focused on advising those people and families who are interested in making investments of this type in Miami, Orlando and South Florida, we have been working for more than twenty (20) years and for this, twenty (20) years that give us a specialty in what we do, If you want to explore real estate investment opportunities, we can schedule a meeting, face-to-face or virtual, to expand this information. Write to us at info@pfsrealty.kinsta.cloud and also visit our website www.pfsblog.kinsta.cloud to learn more about us
