The Christmas lottery draw has spread joy for another year. Some with better fortune than others, will be able to celebrate the holidays with a good pinch to forget about the mortgage, enjoy a vacation in style or buy the dream car.
Excessive waste can end in a broken dream. It would not be the first case of a lottery winner ending up with less money than he had and in debt. Bad decisions are expensive... To avoid it and maximize the prize, you have to know where to invest it. "If you are going to buy a car or a house, take into account the new expenses that you are going to assume during the time that you have them, for example, maintenance expenses, insurance, supplies or taxes. It is money with which you do not counted and surely you want to indulge yourself, don't lose your head", warned the Bank of Spain a couple of days ago.
The first winner is the Treasury, which already takes 72,000 euros of the first prize in taxes, so the 400,000 euros of the jackpot become 328,000. The second is reduced from 125,000 to 108,000 euros and the third from 50,000 to 48,000. Thus, there is already a loss as soon as you collect.
It must be taken into account that inflation, if the money does not move, eats up the quantity. In a term of 10 years and an average inflation of 2% per year, the 328,000 euros of the first prize dwindle to 220,734 in current purchasing power, according to calculations by Abante Asesores. By not spending it, you have to put it to work.
Where? The range is wide and will depend on the risk that each one wants to run, adjusted to their investor profile and objectives (get to retirement safely, pay for their children's education, buy a flat...). As always, diversify is another obligation. "When selecting an investment product, analyze the level of risk you are willing to assume, remember that there is no perfect financial vehicle, but it depends on the risk profile of each saver, so always be wary of products that offer very high returns without assuming great risks", warn from the Spanish Association of Financial Planners and Advisors (EFPA Spain).
In full readjustment due to the rise in rates, the stock market offers opportunities. In Europe, Álvaro Antón, Country Head and Director of Iberia Distribution at abrdn, points to luxury (such as LVMH), industry (Dassault, Nemetschek, Schneider), sustainability and technology. Amid the war in Ukraine, rising interest rates and fears of recession, "investors need to look beyond the headlines. When they do, they will find some of the best stocks in the world at extremely attractive prices," he believes. .
Stephanie Luzon, finance expert at Vivid, ranks banks and brokerage firms as favorites if interest rates continue to rise. "With the high interest rate, banks can bring in more money thanks to the margin between what they offer (to savers for savings accounts and certificates of deposit) and what they can bring in," she says. And if rates drop, they're also a good option "thanks to the fees, commissions and service changes they charge their clients." Taking a broader view, she recommends companies with good debt-to-equity ratios and good cash flows.
The vision is similar at GVC Gaesco Gestión. In energy they see potential in Enagás and Solaria, in tourism in IAG, in telecommunications Cellnex and in banking Santander and Sabadell. At the continental level, in the energy companies Ren, Veolia and Galp; in Saint Gobain, Prysmian, Axa and Nos.
Luzon is also targeting commodity ETFs. "It's a way to diversify and partially reduce risk," she says. But "investors should be aware that it is a very volatile market and influenced by geopolitical movements." Other favorites include gold, iron, oil and natural gas.
With the rise in interest rates, a cycle change opens in which lower-risk options, such as bank deposits or public debt, are becoming more attractive. Of course, beating inflation is more complicated and you have to look abroad. Based on data from the Raisin platform, in less than a year the deposit that pays the most is that of the Italian Banca Progetto and its 2%. At one year, 2.90% of the Belgian CKV stands out and at 2 years that of the Lithuanian Fjord Bank. In longer terms, it reaches 3% at 10 years.
"Betting on a guaranteed and fixed return can be a good choice for those more conservative profiles," believes Luzon. It must be taken into account, however, that current inflation is not beaten. By diversifying the portfolio, some assets compensate others if they are not on a good run, and with deposits there is a guaranteed return.
Not everything is immediacy. Thinking in the long term involves imagining reaching old age well. "A very important aspect is to allocate a part of the prize to save for your retirement and thus complement your future public pension, taking into account that, in the coming years, it will be reduced significantly, so it will be necessary to save to maintain power purchasing power when you stop working", they say in EFPA Spain.
"The sooner you start saving for retirement, the less effort will be and the greater margin you will have to take risks that lead to greater profitability," it adds. The scenario can be to increase the contribution if you already have a plan or to start saving.
The real estate market is one of the kings in Spain when it comes to investing. The stable demand despite the curves puts the purchase to rent as one of the great alternatives, with returns of between 6%-7% gross. It is the operation that offers the best profitability, with a pull in large capitals, although the situation of the property is the key factor.
"Accessibility to housing is an increasingly difficult challenge to achieve", explains Fernando Fuente, Senior Director of the CBRE Spain Valuations and Appraisals area. With the first prize, you can buy a 120 m² home in central neighborhoods of cities such as Oviedo, Melilla, Alicante (Vistahermosa), Logroño (San Adrián-La Cava), Zaragoza, Murcia (San Miguel), Santiago de Compostela (Ensache -Sar), Mérida (Bodegones), Toledo (Los cigarrales-La Bastida), León and Ceuta (in the center of both), but not in Madrid (Recoletos), Barcelona (Dreta de l'Eixample), Bilbao (Abando) , Málaga (El Limonar), Palma (Ciutat Antiga) or Santander (El Sardinero), report from the company.
Continuing on the brick, is it worth paying off the mortgage? Before launching to pay what is left of credit, you have to assess scenarios. “Although it is true that investing the prize in finalizing our mortgage loan is always positive, it must be taken into account that this process has a cost. In addition to paying the pertinent procedures to leave the home free of charges, the commission set in the contract for early repayment must be paid to the bank”, explains Josep Vera, director of business development at Hipotecas.com. The repayment commission on loans signed after June 2019 is 2% in the first 10 years of the loan and 1.5% thereafter.
It must also be assessed that if the mortgage is prior to 2013 and is cancelled, deductions of up to 15% are lost, with a maximum base of 9,040 euros, in rent for payment of installments.
An intermediate way out would be to reduce the mortgage partially, in installments or in term. "There is no better option than another, but we must remember that reducing the amount of our installment will allow us to face the monthly payments in a more comfortable way and pay less interest during the time we have left on the mortgage, while if we reduce the term of amortization we will have to assume the same quotas, but in less time”, continues Vera.