2023-10-19 21:00:42
The habit of investing has become more popular because it is a way to make money pay off, without simply sitting in savings. With the growing interest in investments, several doubts also arise. After all, what is an investment? What is the objective? And what is the best option for me in the financial market?
There are many questions that arise from the time you start investing until the time you redeem, and knowing what to do is as essential as doing it, right? Thinking regarding making things easier, here we have separated everything you need to know regarding the subject.
What is investment?
Investment means the investment of capital, that is, money, with the expectation of appreciation in the future. The term encompasses any financial application made with the aim of obtaining returns, using knowledge of the financial market and strategic analysis to do so.
The logic is very similar to that of a debt, for example. The difference is that being in debt means owing money to the bank, while investing means lending money to it.
What is the main objective of the investment?
There are several reasons why someone starts investing. Whether it’s the search for increased wealth, financial independence, a good retirement or even buying some material good, such as your dream house and car. That’s why, basically, the main objective of investment is to provide a return on money above inflation, which measures the increase in prices of goods and services.
When investing in a financial product, you can get a greater return than if you left it in your bank account. Thus, it is a way to achieve your goals in a shorter period of time.
What are the advantages of investing?
Investing your money in the financial market gives you several benefits. Even though there is a risk, some greater than others, depending on the investment, the return tends to be more positive for your pocket. Investing is a way of making your money work for you.
Among all the advantages of investing, some are:
- Increase your assets;
- Accumulate a good retirement;
- Achieve your dreams, such as international travel, your own home and the car of the year;
- Have greater security for the future;
- Have an emergency fund so you don’t go into debt due to life’s unforeseen events;
Furthermore, you, the investor, can enjoy the advantages and reduce risks if you have investment advice at your side. See below what Renova Invest can do to increase your money:
What is the difference between saving and investing?
You may have already thought that saving is the same thing as investing, but that’s not the case. Saving is related to saving money, reducing unnecessary expenses and following financial planning. This is because the objective at the end of the month is for your income (money inflow) to be greater than your outflow (money expenditure).
It’s a big challenge, as the salary often barely covers fixed expenses. Therefore, it is important to have discipline to get out of this financial bind in the long term. When you decide to save, you need to set aside an amount each month until you reach the amount you want.
Investing means saving money and investing it in an asset in the financial market to receive remuneration in the future. As if it were the second step, first save capital and then start investing. Part of the confusion in thinking they are the same thing is the fact that the savings account in Brazil has a small yield and is a very popular application.
What does it mean to be an investor and who can invest?
An investor is a professional who invests their money (and even other people’s money) in investments, such as shares, government bonds, commodities, investment funds and other financial products. It might be someone who invests just to achieve a goal or lives from passive income. By definition, an investor is someone who invests their money in something, expecting a return on that investment.
And anyone can be one. Just make regular contributions and whatever amount you can afford. To be a qualified or professional investor, you must have invested at least R$10 million, certified by your own declaration, or else have authorization to act granted by the CVM, through technical certification.
What investor profiles?
The investor profile is intended to show your “personality” in the world of investments. It reflects your goals, needs and preferences, helping to answer the question: what do I want from investing?
One of the main factors related to the profile is your risk tolerance. Although no one really wants to take the risk of losing money or not finding expected returns, it is a fact that all investments involve some danger. How open are you to the possibility of loss?
Depending on the answers to these and other questions considered in the profile evaluation, you will be identified as a conservative, moderate or bold investor.
Conservative
The conservative investor values security. To obtain it, he accepts the reality of having limited income — since the safest alternatives generally do not offer the most attractive returns.
The conservative’s preference may depend on several elements. For example, someone who is already enjoying their resources and does not want to put them at risk. Or a person who has started investing and wants to understand the specifics of the market before taking any more risks.
Furthermore, a conservative investor can be one who has short-term, medium-term and long-term objectives and chooses to seek options that keep money available without losses, regardless of the investment horizon.
Moderate
Following the profiles, the moderate investor is someone a little more dynamic than the conservative. He still has an attachment to security and is not interested in taking too many risks. However, he already accepts considering higher risk assets – especially for the long term.
A word that resonates well with the moderate investor is balance. One of the most common ways to maintain moderation is to combine higher and lower security investments, preventing the portfolio from facing significant danger.
Therefore, the moderate investor generally seeks to balance stability and returns. In other words, the combination of risk and security can earn you extra money without generating great fear or nervousness regarding putting your capital at risk.
Thrown off
The bold investor is someone who prioritizes profitability. To do this, as you have seen, it is necessary to give up a large part of security — since assets with a greater possibility of return usually have greater risks.
Note that we talk regarding the “possibility” of income. This is because, in bold investments (generally variable income), it is not possible to guarantee gains. Thus, the bold investor is looking for significant profits, but runs the risk of significant losses.
And why do people with a bold profile accept so much risk? Many of them manage risks by seeking knowledge and experience in the financial market or by choosing to rely on investment advice to seek better results on the stock market.
How to start investing?
After understanding what an investment is, it’s time to talk regarding how you can start investing. The first thing you need to do is organize your finances. Financial planning is essential, write down everything that comes in and everything that comes out of your pocket.
Separate what are fixed expenses (electricity bill and rent, for example) and what are variable expenses (such as going out with friends and spending on apps). After that, identify where you can reduce expenses and how much per month you can invest without harming your financial commitments.
The second step is to create an emergency reserve, so that you don’t have to go into debt if something unforeseeable happens. In practice, this reserve must contain enough capital to overcome any type of difficulty and unforeseen financial events.
In this sense, the ideal is for it to be able to support your cost of living for at least 6 months — especially if you have a permanent job, with a work record. If you are self-employed or are a businessman, you may prefer larger amounts, such as the equivalent of 12 months of account.
See how to create an emergency fund here.
The third step is to find out more regarding the investment options available and which ones fit your investor profile. This way, you can know how much you can invest and you don’t always need a lot of money to start.
In short, what you need to start investing is:
- Establish your goals, what do you want to do with the money?
- Determine the amount you will invest per month
- Discover your investor profile
- Study regarding investments to learn more regarding this universe
- Open an account with a specialized brokerage such as Renova Invest
Discover the types of investments
There are two main classes of investments. Fixed income offers different types of investments, meeting different objectives and investor profiles. Here, the main characteristic is predictability in relation to income.
Fixed income securities function as a loan to the issuer. Thus, the investor invests his money and receives the amount back with remuneration. At the time of the investment, he knows what the rules will be and how profitability will occur — therefore, this class is considered safer.
4 best fixed income investments to watch in 2023
More than knowing that investing in fixed income can be a good alternative for this year, it is essential to know the opportunities available in the financial market. The 4 best investments for 2023, follow the titles and examples of applications, according to our partner and investment advisor, Karina Afuso!
1) Short post-fixed titles
Investments indexed to the CDI with an average term (duration) of up to 3 years.
- Example: LCI Banco Pine – 2 years – 98%CDI (indicative rate on 01/19)
2) Medium and long-term inflation bonds
In an environment of greater stress on expectations of the much-feared inflation, we continue to prefer allocations to inflation-linked assets (IPCA), with a duration of up to 7 years.
- Example: Rumo incentivized debenture – Logistics Sector – AAA Rating – IPCA + 6.55% – pays annual interest – duration 5.29 years (indicative rate on 19/01)
3) Short pre-fixed titles
The attractiveness of these roles has grown – considerably – in recent times. But be careful, it is important to allocate a small part of the portfolio and to short assets, up to 2 years.
- Example: CDB Banco Andbank, 14.90% per year, 1 year (indicative rate 19/01)
4) Digital Fixed Income
This is a new asset that uses blockchain technology to tokenize assets. One point that must be taken into consideration is that it has nothing to do with cryptocurrencies. Therefore, before you go putting money in without knowing it, get in touch with our team of advisors and schedule a meeting, this is the best way to make your money pay off.
Variable income, on the other hand, has greater return potential, at the same time that there is also more risk in its movements. It is a class of investments that tends to be preferred by investors with a bold profile.
5 examples of investing in variable income
1. Actions
Shares in publicly traded companies are among the main alternatives for bold investors. Furthermore, they are among the most common variable income investments — and are traded on the stock exchange.
These shares consist of fractions of a company’s share capital. This way, when the investor buys shares on the stock exchange, he is becoming a shareholder in the organization. In this position, he is exposed to business results — whether positive or negative.
2. Equity funds
Equity funds (FIAs) are another example of an alternative that is often part of bold portfolios. They are a type of investment fund that prioritizes the shares of publicly traded companies for portfolio composition.
Like other investment funds available on the market, FIAs function as collective investments. The investor acquires his participation by purchasing shares in the vehicle — available on the investment bank’s platform —, while the allocation of capital is the responsibility of the professional manager.
3. Hedge funds
Another type of collective vehicle that can be part of the portfolio of an investor with a bold profile are multimarket funds. While stock funds are a modality in which the majority of the portfolio is exposed to these assets, multimarket funds do not follow a specific rule.
Therefore, they have greater freedom to mix strategies and find different opportunities present in the market. An example of a hedge fund for bold investors are cryptocurrency funds.
4. ETF
Exchange traded funds (ETFs), or index funds, are a type of collective vehicle with shares traded on the stock exchange. And many of them can be interesting additions to the portfolio of a bold investor.
The main characteristic of these vehicles is their passive management. This happens because the objective of an ETF is to replicate the performance of a financial market indicator.
5. BDR
Finally, the fifth example of an investment alternative for bold investors is Brazilian depositary receipts (BDRs). They are certificates traded on the Brazilian stock exchange that are backed by investments from abroad — such as shares, ETF shares and fixed income securities (bonds).
For BDRs to be made available to Brazilian investors, a depository institution in Brazil directly purchases the asset on other stock exchanges. It must subsequently keep them in custody and issue certificates with due support.
What is diversifying investments? Why do that?
One of the main tips for those who want to invest is portfolio diversification, which is allocating resources across different types of assets and applications, in order to dilute risks. In other words, by investing in different assets and securities, the portfolio is exposed to different markets, sectors and risks.
Therefore, your capital will not be subject to just one factor, which reduces the chances of large losses. But also be careful with false diversification, which happens when the portfolio presents different alternatives, but linked to the same risks.
Investment diversification generates opportunities to enhance profitability. This is because, knowing how to manage this strategy, it is possible to invest in alternatives with greater gains, but which also offer more risks.
What are other investment options available on the market?
As the universe of investments in the financial market continues to grow, the possibilities are many. In addition to all the options we mentioned here in fixed and variable income, there are alternative investments available on the market.
Investing in private equity funds, infrastructure, real estate investment and some types of private credit products is investing in alternative investments. This trend has grown significantly in recent times, even more so in the main markets – such as the North American – where the growth rate has been more than twice that of the market as a whole.
Among the characteristics of this type of investment is the fact that they are a strategic option for your assets with a focus on the long term, that is, the next 10 or 20 years. Therefore, it is very important to evaluate the reputation and performance of the product manager.
See 7 types of alternative investments
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Venture capital
This type of investment is similar to a higher risk investment fund. It is a way for investors to inject financial resources into small and medium-sized companies that are expanding.
Venture capital can emerge as an alternative for companies that are new to the market, including startups. To achieve this, it is important that they already have a certain level of growth and need investment to develop further.
Counting on financial resources from venture capital is a possible solution to accelerate the business. If the value is well applied, all sides (company and investor) can benefit.
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Participation investment funds (FIP)
This investment vehicle has a strategy focused on investing in privately held or publicly traded companies, with the aim of actively participating in their management. Just like in venture capital, the companies that make up the fund are normally in the development phase.
In this way, the fund manager actively participates in the companies’ decision-making. This may occur through an agreement with shareholders, purchase of sufficient shares to participate in the control block or other procedures that guarantee this right.
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Private equity
The private equity modality is the best known form of participation investment fund. In it, the FIP buys a considerable part of companies whose share capital is not publicly traded on the stock exchange.
Thus, they can accept direct investments from other companies or qualified investors. The funds not only inject financial resources into companies, but also participate in the share capital.
With this, they become partners in the business and can actively participate in management. The investor, therefore, becomes one of the main responsible for the appreciation and growth of the business. Due to this characteristic, the possibilities of return are greater.
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Fundos special situations
Special situations funds can invest in companies and are dedicated to structuring operations that normally involve credit. To do this, they look for illiquid assets, often depreciated, which are acquired with a focus on a return in the medium and long term.
It is not possible to know in advance where the fund’s resources will be invested, as they do not have a specific characterization. Therefore, the risk level of this investment is high and must be considered by the investor.
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Cryptocurrencies
Virtual currencies are called cryptocurrencies as they do not exist physically but are maintained by cutting-edge technology. They can now be used to carry out financial transactions. However, they cannot be withdrawn and do not belong to any economy in the world.
You may have heard regarding the subject in recent years, as cryptocurrencies have become more relevant. It is possible to invest through the direct purchase of the asset, but this option is not regulated in Brazil. This can make the investment more risky.
To minimize the chances of falling for scams, it is worth making sure of the quality and reliability of the means used to invest. Furthermore, there is the possibility of searching for investment funds that invest in cryptocurrencies.
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Gold
Gold is a valuable metal with intrinsic value. For this reason, it is considered an important store of value, especially in times of crisis. In these scenarios, your price tends to appreciate.
When the stock market depreciates, the price of gold can rise. Furthermore, the metal can be used as a hedge to protect the portfolio once morest exchange rate variations. Just like cryptocurrencies, it is possible to invest in gold through investment funds.
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Works of art
Investing in works of art is a very common practice in other countries. The habit is still not widespread in Brazil, as it is an investment that normally requires higher capital. Furthermore, the risk is also high as liquidity is low.
There are several options for works of art to invest in, such as canvases, engravings, sculptures, photos and many other pieces from a wide range of artists. The more renowned and respected the artist is, the more expensive the work becomes.
As it is a broad market, investors can count on varied investment strategies. It is possible, for example, to acquire the work through a private negotiation, as well as make contributions to art investment funds.
How important is it to stay informed in the world of investments?
The role of studying investments is to guarantee better results from your investments and your wealth formation. Although it is not the only element for an adequate relationship with finances, studying the financial market is essential for anyone who wants to deal with money in an intelligent way that suits their needs.
If, on the one hand, it is essential that you know how to identify your income and expenses — in order to be able to save frequently —, on the other hand, you need to know what to do with that saved money, right? The study of investments precisely allows us to achieve this objective.
Check out some of the advantages of learning regarding investments below:
Use money efficiently
As you have seen, the first benefit of studying investments is being able to use your money more intelligently, making choices aligned with your needs. This way, you will be able to clearly and precisely identify the most suitable alternatives for investing.
Stay up to date with market alternatives
If you’ve already started investing, you probably know that there are different options for allocating your money. Furthermore, as you may have noticed, the investment market is quite dynamic, with new options emerging all the time.
Therefore, constantly improving your knowledge is necessary so that you can monitor market dynamics and identify possible opportunities for contributions.
Strategically diversify your portfolio
One of the most common rules of investing is diversification. In other words, avoid allocating all your capital in a single asset. This is an important practice to protect your capital, ensuring that it is not held hostage by just one sector or company in the market, for example.
But what is the best way to diversify your portfolio? Studying investments helps answer this question. As you have seen, the options for allocating your capital are diverse. To know which ones are best suited to your reality, it is essential to seek information.
Achieve more autonomy and security to explore the market
Another advantage that studying investments brings is the possibility of having greater autonomy and security when exploring different market opportunities.
It is common that, in their first contact with investment alternatives, investors adopt more conservative stances, without great exposure to risk. As a consequence, there is less potential for profitability.
However, when investors dedicate themselves to studying finance and investments over time, they can learn to better deal with market characteristics — especially in variable income. This way, you can expose yourself to greater risk, if you wish, seeking better results — maintaining a well-defined strategy and risk management.
See cHow to study investments properly here.
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