Assessing whether an investment generates real value has become a challenge in Peru. With annual inflation at around 4% and the Central Reserve Bank (BCRP) maintaining the benchmark interest rate at 4.25% to contain inflationary pressures, it can be hard to measure the success of investments.
For the modern investor, especially executives and entrepreneurs looking to grow strategically, it is key to have clear and practical criteria to measure whether an investment is achieving its mission: to bring the investor closer to their financial goals with useful and applicable information.
“In three years, accompanying more than 550 Peruvian investors, we have seen that the most frequent mistake is not choosing the wrong instrument, but not knowing what criteria to measure it by. In fact, three out of four people who invest are clear that they want to do so, but they are not clear on which product to choose. That is why it is essential to strengthen investment advisory and guide the user in decision-making,” explains Diego Mallqui, wealth management specialist and CEO of Finniu, an investment platform.
The Finniu specialist has identified the four most common mistakes made when assessing whether an investment generates real value:
1. Not considering the impact of inflation on profitability:
In the first four months of the year alone, prices in Metropolitan Lima increased 3.72% (Instituto Nacional de Estadística e Informática – INEI), so an investment that yields below that level loses real value. In the face of this inflationary pressure, an alternative for those seeking stability is to increase real estate investments, a sector that tends to resist political volatility better than others, especially before elections or during the first year of a new government, and that has demonstrated a sustained value appreciation.
2. Not considering hidden costs:
Maintenance fees, withdrawal penalties, transaction fees or additional charges can significantly decrease the actual return on an investment. That is why it is essential to analyze net profitability and to verify what costs are subtracted. It is always advisable to ask about administrative commissions and understand how they affect final profitability.
3. Assuming a risk level that does not correspond to personal profile:
An investment can show an attractive return, but if it forces you to take risks you don’t understand or can’t tolerate, that value can be lost quickly. That’s why it’s important to verify that you understand how the instrument works, that the level of risk is aligned with your goal and your time horizon, and that there is formal regulation for the product structure.
4. Not linking the investment to a clear equity objective:
Beyond the percentage on return, it is key to know if that investment is really bringing you closer to your defined goal, whether it is buying a home, building a fund, financing studies, or ensuring greater financial stability. To do this, assess whether the progress is consistent with your goal and determine whether it is necessary to adjust contributions or even change instruments to accelerate growth.
“In an environment where the Peruvian market is facing an election year marked by greater volatility and uncertainty, having criteria to evaluate an investment is not a luxury, it is the only way to not be distracted by the noise. Prioritizing these criteria over market commotion is key to making more informed decisions,” concludes the Finniu specialist.