2023-08-23 18:43:48
ETFs (Exchange Traded Funds) are innovative financial products that have grown rapidly both in Brazil and worldwide. Understanding the fundamentals of these exchange-traded funds is essential for any investor, as they offer access to a broad universe of assets efficiently, transparently and flexibly. In this complete guide, we’ll explore everything you need to know regarding ETFs, from their origin and structure to their advantages, functioning and existing types. Get ready to discover how ETFs can intelligently and strategically compose your investment portfolio.
What are ETFs?
ETFs are exchange-traded mutual funds that replicate specific indices, allowing investors to gain exposure to a wide range of assets simply and efficiently. These funds were created in the 90s, but gained prominence following the financial crisis of 2007/2008, when investors began to seek products with greater transparency in management.
The structure of an ETF combines the dynamics of asset trading with the practicality of an investment fund. In the global market, ETFs have shown exponential growth, with a total of US$ 9.2 trillion in assets under management, more than 8,966 ETFs listed on exchanges and more than 500 managers involved.
In Brazil, the first ETF appeared in 2004 through a partnership between Itaú and BNDES. There are currently 77 ETFs listed on B3, with a total of BRL 39.5 billion in assets under management. The Brazilian ETF market has shown significant growth in recent years, with a compound annual growth rate of 25.1%.
Why have ETFs grown so much?
ETFs have become increasingly popular due to a number of benefits they offer investors. Their versatility is one of their main attractions, as they allow the implementation of different investment strategies, from short-term operations to long-term strategies, such as buy and hold.
In addition, ETFs provide diversification and efficiency, allowing investors to access a diversified portfolio of assets in a single transaction. This is especially beneficial for more sophisticated investors who want to build a portfolio of different ETF types and themes.
Another point in favor of ETFs is cost minimization. Because they are index funds, they generally have lower management fees than other financial products, such as traditional investment funds. In addition, transparency is an important factor, as ETFs disclose their portfolio composition on a daily basis and pricing is publicly available.
Simplicity in trading is also a differential of ETFs. Quotas can be bought and sold through any brokerage house during the trading session of the stock exchange, in the same way as a share is traded.
How do ETFs work?
ETFs have their main trading dynamics in the secondary market, that is, trading takes place like any other stock on the stock exchange. However, ETFs also have a primary market, which is responsible for maintaining the ideal volume of fund shares.
In the primary market, the main agents involved are the fund manager, the market maker and the buyers and sellers. The fund manager is responsible for managing the ETF, while the market maker acts as the agent responsible for providing liquidity to the market, keeping the bid-ask spread and the ETF trading at fair prices.
Liquidity is an important factor to consider when investing in ETFs. Liquid assets ensure agility and security for investors, allowing them to enter and exit a position in a short period of time. ETFs have three layers of liquidity: screen liquidity, market makers, and underlying asset liquidity.
Types of ETFs in Brazil
There are two main types of ETFs in Brazil: fixed income ETFs and variable income ETFs. The difference between them lies in the index asset that the ETF mirrors. Both types of ETFs offer investors the opportunity to diversify their portfolios with just one investment.
Fixed income ETFs are suitable for investors looking for exposure to fixed income assets such as government or corporate bonds. Variable income ETFs are indicated for those who wish to invest in stocks or other variable income assets.
Frequently asked questions regarding ETFs
How to buy ETFs?
ETF shares are traded on the stock exchange, which facilitates their purchase and sale. Investors can acquire them through brokers of their choice, either through operations carried out directly via the online trading system (home broker) or through other available means.
What is the minimum investment to purchase ETFs?
The minimum investment to acquire shares of an ETF corresponds to the standard trading lot on B3, the Brazilian stock exchange. The amount may vary according to the ETF and is available for consultation with brokers.
What are the factors that influence the trading price of an ETF?
The trading price of an ETF is influenced by the supply and demand of shares on the trading floor. When the quotation of an ETF is above its respective reference quota, the market maker or a large investor can buy the fund’s basket of assets and request the creation of quotas to sell them to the market, thus regulating the demand for that active. Likewise, when the price of an ETF is below its reference quota, market participants can buy shares of the fund on the exchange and request the redemption of the basket of assets, regulating the supply of quotas. This process is known as arbitration.
What are the costs involved in ETFs?
The costs involved in ETFs include the management fee, which is already built into the B3 share, custody, brokerage and fees. It is important to check with your chosen broker for detailed information on the costs involved.
How does ETF taxation work?
Taxation of ETFs varies according to the type of ETF and current legislation. In fixed income ETFs, taxation is 15% on the capital gain and income tax is withheld at source. As for variable income ETFs, taxation is also 15% on the capital gain, but the investor is responsible for calculating and paying the tax.
What are the risks involved in ETFs?
Like any equity investment, ETFs carry risks. Market risk is related to changes in the price of the assets that make up the fund’s portfolio, and liquidity risk is associated with the ability to buy and sell ETF shares in the secondary market.
Where to find ETFs listed in Brazil?
All ETFs listed in Brazil can be found on the B3 Bolsa Brasil Balcão. The complete list of listed ETFs is available on the B3 website for consultation.
Conclusion
ETFs are innovative financial products that offer investors an efficient and flexible way to access a wide range of assets. With low cost, simplicity in trading and diversification, these funds have become an increasingly popular option among investors of all profiles.
In Brazil, the ETF market has shown significant growth in recent years, providing investors with opportunities for diversification and exposure to different asset classes.
However, it is important to remember that investing in ETFs involves risks, just like any investment in equities. It is essential to carefully analyze the factors involved, such as portfolio composition, fund liquidity and associated costs, before making any investment decision.
Therefore, if you are looking for practicality, diversification and transparency in your investments, ETFs can be an excellent option to compose your portfolio. Consult a trusted stockbroker and start exploring the opportunities offered by these exchange-traded funds.
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