Since Banco de la República began reducing interest rates, investment funds have emerged as a better alternative.
In Colombia’s changing financial landscape, traditional Term Deposit Certificates (CDT) have found a new competitor: the investment funds. The latter have proven to be an attractive option for investors seeking a rsuperior long-term profitability.
What is a CDT?
A CDT is an investment product offered by banks, which consists of a contract in which the client deposits a sum of money for a fixed period, which can vary between 12 and 18 months. During this time, the bank uses the deposited capital to generate profits through various financial activities and, at the end of the period, returns the initial capital plus an agreed return. However, this return is usually quite modest, generally between 2% and 5% per year. Furthermore, if the investor needs to withdraw his money before the agreed term, he faces a significant penalty, making CDTs less flexible.
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The New Option: Investment Funds
Unlike CDTs, investment funds allow greater diversification by investing in a variety of assets such as stocks, bonds and international markets. This diversification not only mitigates risk, but also offers the opportunity to leverage growth across different sectors and geographies. As the Bank of the Republic of Colombia has begun to reduce interest rates, Investment funds have emerged as a more profitable alternative. Investing in these funds allows investors to benefit from falling interest rates, while also having the flexibility to adjust their investments based on market conditions.
Best Investment Funds in Colombia
Among the most prominent investment funds in Colombia are Colfondos, Credicorp, Tyba and Skandia. Each of these funds offers different strategies and risk levels, allowing investors to choose according to their financial needs and objectives.
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CDT or Investment Fund?
The choice between a CDT and an investment fund depends on the investor’s risk profile, their objectives and their investment horizon.
- CDT: It is suitable for conservative investors seeking to protect their capital and obtain a fixed and predictable return.
- Investment fund: It is ideal for those with a higher risk tolerance and who are looking for greater potential for long-term profitability.
