I have enough time until my future retirement…should I worry?
There are certain polemic issues that generate arguments. This is mainly because of the different interlocutors point of view or because their do irrational criteria and lack of theoretical basis. One of these controversial topics is ‘the future Spanish pensions‘.
Since there are already large studies about this issue, it is not our intention to analyze the subject in detail. Instead, we would want to point out an unfortunate true fact. The pension payments will not allow pensioners to maintain the standard of living they have had until their retirement.
The Spanish pension system (based on contributions of current workers allowing the payment of retirees pensions) has two big problems.
- A radical modification of the population pyramid in Spain.
- The lower salaries of current workers, which are insufficient for the committed payments to pensioners.
- Gradual implementation of a capitalization system for workers who are entering the labor market (“Austrian backpack” or Chilean capitalization system).
- Separation of contributory benefits (to be paid by Social Security) from non-contributory benefits (to be paid by the Budget).
- Increase of the current tax rates and/or the creation of new specific tax figures. This explains, for example, the maintenance of the inheritance tax or the possible creation of the new tax on capital transfers.
- Reduction of the amounts to be paid to future pensioners.
However, all the aforementioned measures (certainly very controversial) turn their back to the most important one. The need for each of us (regardless of our age) to be aware of our own private pension fund.
Traditional pension funds have both advantages (tax relief…) and disadvantages (minimum liquidity…). Furthermore, the competent authorities still have to modify the tax treatment of the benefits received by the beneficiaries when their pension funds are redeemed. It is clearly “disturbing”. In many cases, this form is discouraged compared to traditional investment funds.
Nevertheless, it should be noted that when speaking of Private Pension Funds we do not refer only to a traditional Pension Fund but to the formation of an Investment Portfolio. This portfolio guarantees the maintenance of our standard of living when our working life ends.
YOUR INVESTMENT PORTFOLIO
Once we know the importance of building up our investment portfolio, several questions will arise.
- Imagine that you personally manage your Investment Portfolio or that you delegate the management to a third party. This last point is not only a matter of professionalism, but also of significant costs. Perhaps, initially, it would be more appropriate to make personal investment decisions (always in an active way).
- What level of risk would you assume in your investment portfolio? Many studies have been carried out and a repeated conclusion has been following them. The risk level of our portfolio will be higher in our youth and lower as soon as our retirement approaches. Logically, if your portfolio is well constituted, higher levels of risk will be directly related to higher expected returns.
- What type of assets should you include in your investment portfolio? The most important thing about a portfolio is its adequate diversification (both in terms and types of assets). Consequently, you should manage the existence of fixed income assets (it does not mean that there will not be losses), variable income assets, monetary assets, liquidity… and -why not- an adequate percentage of Alternative Investments.
RELYING ON ALTERNATIVE INVESTMENT
Fellow Funders remains committed to promote Alternative Investment as a necessary and obligatory part of any saver’s portfolio (see published newsletter). When talking about Alternative Investment, it is referred to investments in startups and/or nanocaps. These investments have important levels of risk, but also high possibilities of profitability. Likewise, when talking about an adequate percentage of Alternative Investments, no more than 5/10% of the total personal Investment Portfolio should be composed of this type of assets
Fellow Funders has focused on Alternative Investments such as Equity Crowdfunding, or investment in the capital of startups. Fellow Funders manages the whole process through an online platform.
However, when Fellow Funders offers to investors the possibility of participating in the capital of startups and/or nanocaps, it is done always by focusing on two basic aspects:
- The need to use professional criteria to define our investment.
- The need to diversify our investments in order to reduce risks and maximize expected returns.
Fellow Funders respects commitments (such as trust, transparency, security and long term project follow-up), which is the real raison d’être of the company. Fellow Funders would like to count on your help. Regardless of your age, with both Fellow Funders help and yours, an ecosystem that allows to generate investment opportunities by supporting the development of the entrepreneurial ecosystem in Spain can be created.
Would you like to help to achieve Fellow Funders goals? Would you like to join the world of Fellow Funders? Fellow Funders is waiting for you!
The Fellow Funders team