2024-02-14 16:00:01
Every now and then we talk regarding debentures on our blog, so you should know something regarding the subject. Debenture is a fixed income product that, in general, has a more interesting profitability than other products of the same nature.
However, it is also a highly complex product, which is why we have prepared this quick guide for you.
What is a Debenture?
In very general terms, it is when you lend money to a non-financial company and it pays you back some time later with interest. In a very simplistic way, it is a good summary. However, a debenture generally does not there is nothing simple.
Due to variations in pre-fixed, post-fixed or even hybrid interest rates, there is no FGC guarantee, and liquidity can be a little tricky. In addition, there are still simple, convertible, exchangeable and incentivized options.
Despite all these peculiarities, it is far from being a bad asset. Quite the opposite. In general, they have risks considered lower than equity securities.
For now, we’re not going to go so deeply into each type of debenture, but we’re going to recommend other content on the subject here on the blog, right?
What is the main difference between Debentures and a common Fixed Income title?
In general, debentures are investments that pay better than common fixed income. Precisely because issuing companies have a greater risk than banks and the government itself.
On the other hand, depending on the product you choose, a debenture can be as safe as a direct treasury bond. It all depends on which company you buy from and how you base your decision.
But don’t forget, the best strategy you can have for your investment portfolio is to consult a Renova Invest advisor. Your portfolio will have a differentiated and specific strategy for you and your needs, respecting your investor profile and aiming to maintain and expand your assets. To speak to one of our advisors, Click here!
What are the main advantages and disadvantages of Debentures?
To facilitate your understanding and understanding, we created this infographic illustrating the main advantages and disadvantages of this asset.
Benefits:
- Higher yields;
- Liquidity for early exit; *
- Possibility of knowing the company’s rating;
- Possibility of settlement on a parallel market;
- Medium and long term allocation.
Disadvantages:
- It is not guaranteed by the FGC;
- The company may fail;
- Failure to meet the rates offered.
*When we talk regarding early liquidity, it is a slightly more complicated issue. We will cover this subject in more detail in a future article.
The FGC does not guarantee it, but is there any other guarantee?
This is probably one of the most important questions in this article. Just because the FGC doesn’t guarantee it doesn’t mean it’s a mess. Otherwise, it wouldn’t make any sense for Renova Invest to recommend you. So don’t worry, there is no chance of falling for a scam and losing all your money. At least, not with our advice!
To begin with, there is the rating, a risk rating on companies. The higher the rating, the less chance you have of defaulting. And the best part, this is a public index made by companies like B3, and other agencies that are global references such as Moody’s, Fitch and S&P (Standard & Poor’s).
Therefore, the first tip we give you is: don’t go out and buy debentures from a company you don’t know. And second tip, and most important, always count on a qualified investment advisor.
Other forms of guarantee to secure your payments are:
- Real;
- Floating;
- Subordinate;
- Unsecured.
In fact, this type of asset is very extensive and complex. Therefore, it demands a lot of study, attention to the market and new trends. Here at Renova, we have a team focused exclusively on fixed income and its details, so count on us!
But how do debentures work in practice?
For you to understand in practice, we will explain it to you very simply:
Imagine that a company called Faria Lima Investimentos wants to build a block of beach tennis, and this project will cost 1 million reais. It turns out that the company doesn’t have that money in cash, and a loan would be much more expensive. Then, Faria Lima Investimentos issues a debenture so that the investors’ money invested pays for its financing. That simple.
However, this brief explanation raises several new questions. For example, how interest, salaries, remuneration and so many other questions are calculated that it is impossible to list here. And the best answer to all of this is: it depends.
That’s why it’s so important to have an investment advisor, so you can focus your time on your business, and we study this market for you.
How regarding now we talk regarding debenture categories?
We have some types of debentures, they are simple, convertible, exchangeable and incentivized. Each of them has its particularities, which depending on what interests you, makes more sense for your investor profile.
Convertible debentures: In this modality, the investor has the option of transforming his capital into shares in the issuing company.
Simple debentures: are the most common. They have pre-fixed, post-fixed or hybrid income, and interest payments according to the issue.
Exchangeable debentures: here, there is the option of exchanging the security for shares in a company other than the issuer itself.
Incentive Debentures: These ones have tax exemption for individuals. This way, the investor does not need to pay income tax on the profitability of his asset.
And speaking of investments without income tax, did you know that Renova can set up a special investment portfolio for you free of Income Tax? Want to know how? Click here and talk to an investment advisor!
Debentures are a very complex subject, aren’t they? And we haven’t even said everything regarding it. But if you want to know more regarding this subject, tell us in the comments!
What we also want to know is what you thought of our talk regarding debentures? Do you have any questions? Tell us also in the comments, and be sure to consult your Renova investment advisor!
Common questions
What are the main types of interest on debentures?
Prefixed, postfixed and hybrid.
And how to choose the best type?
Pay attention to the market. As the interest rate in Brazil is very unstable, especially following the pandemic, all of this makes a lot of difference. So the decision between these modalities needs to be very well based on the economic scenario. Well, imagine that you buy a post-fixed debenture, believing that the interest rate will only rise from now on. But in some months, exactly the opposite happens. Well, your income ends up losing a large part of the profit. It is also important to consider your portfolio strategy as a whole, following all, without a diversified strategy, it is impossible to make real gains.
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