100 meters or a marathon?

Nearly 5 months into 2023, it is shaping up to be a positive year for financial markets, though not free of volatility. In this context, one type of investment stands out as very attractive: time deposits.

After the Central Bank's rate-hike cycle, these instruments can reach returns above 12% per year going forward, something typically reserved for risk investments.

However, in scenarios of high reference rates, by construction, the return required for risk assets (stocks and bonds) also increases. It's the only way for someone to be willing to put their capital to work.

Thus, international stock markets show returns of between 8% and 10% in dollars and the IPSA exceeds 6% in pesos. Somewhat weaker is fixed income, which shows gains of between 1% and 2.5% in dollars while in Chile it reaches only 1% nominal. This before reaching the midpoint of the year.

Thus, just as someone prepares differently for a 100-meter race or a marathon (speed, nutrition, etc.), the call is not to lose sight of what type of problem you want to solve when investing. It may be that in pursuit of winning the first meters, you end up halfway through the 42 kilometers.

This column was originally published in La Segunda [LINK]