A recent personal experience involved assisting Mexican parents in investing their savings effectively, highlighting the complexities faced by individuals navigating financial markets in Mexico. The goal was to establish a sound investment strategy characterized by low fees, diversification, protection against currency devaluation, and avoidance of speculative assets.
In the U.S., a typical investment portfolio includes funds across the total U.S. market, international markets, and bonds or short-term Treasuries. The recommended approach for those living in Mexico involves a combination of Mexican Treasuries (CETES) and globally diversified stocks and bonds through ETFs.
Despite running a successful business, the author’s parents lacked financial literacy, relying on a risky investment scheme offering guaranteed returns. After evaluating these investments, the author transitioned their funds to a more stable investment structure involving CETES, which currently yield over 7%, and ETFs designed for international investors.
Challenges arose while navigating brokerage options. Many reputable U.S. brokerages do not cater to Mexican residents, and those that do impose high fees or restrictive investment thresholds. As an alternative, Interactive Brokers was initially pursued but ultimately did not approve the account. The process was smoother with Mexem, a European brokerage, which provided access to U.S-domiciled assets without significant penalties.
The final investment allocation consisted of 40% in CETES, 40% in all-world stocks, and 20% in all-world bonds. The experience highlighted the importance of financial literacy, especially as one ages, and the need for a formal financial plan to address future uncertainties.
Why this story matters:
The article underscores the financial challenges faced by individuals in Mexico regarding investment options and financial literacy.
Key takeaway:
Investing wisely requires awareness of fees, diversification, and understanding the local financial landscape.
Opposing viewpoint:
Critics may argue that reliance on foreign brokerages could expose investors to additional risks and may not always align with local regulations.
