What are low-risk investments? See profitable options

Investing money is a wise strategy for anyone who wants to build wealth, ensure financial stability and achieve long-term goals. However, many people are apprehensive about the risks involved in investing, especially in unstable economic scenarios. Fortunately, there are low-risk investment options that offer solid and consistent returns over time. 

Understanding the concept of risk

Before we dive into low-risk investment options, it's important to understand what "risk" means in the financial context. In simple terms, the risk of an investment refers to the possibility of losing money or not achieving the expected returns. High-risk investments generally offer the chance of higher returns, but also have greater potential for loss.

Low-risk investments, on the other hand, have a lower probability of capital loss, but also tend to offer lower returns. These investments are often preferred by conservative investors or those with shorter time horizons.

Low-risk investment options

In the financial world, where uncertainty is a constant, the search for low-risk investment options has become a priority for many investors. Market volatility, economic fluctuations and unpredictable events can generate anxiety and concerns about the security of investments. However, in the midst of this challenging scenario, opportunities arise for those looking to protect their capital while seeking consistent returns.

Treasury Direct

In the world of low-risk investments, Treasury Direct stands out as one of the most popular and accessible options. Created by the National Treasury in partnership with the Brazilian Stock Exchange, this program offers investors the opportunity to purchase federal government bonds directly, without intermediaries, making it an attractive alternative for those seeking security and profitability.

How Treasury Direct works

Tesouro Direto works as an online platform where investors can buy and sell federal government bonds simply and directly. The securities available include the Selic Treasury, the IPCA Treasury and the Prefixed Treasury, each with different characteristics and risk profiles.

• Selic Treasury: This bond is indexed to the Selic rate, the basic interest rate of the Brazilian economy. It is suitable for those looking for daily liquidity and protection against interest rate volatility.
• IPCA Treasury: This bond is indexed to inflation measured by the Broad Consumer Price Index (IPCA), plus a fixed interest rate. It is an interesting option for protecting investors' purchasing power over time.
• Prefixed Treasury: This bond offers a prefixed interest rate, known at the time of purchase, making it an attractive option for those looking for predictable returns.

Advantages of Treasury Direct

Tesouro Direto has several advantages that make it a popular choice among investors of all profiles:

• Security: Federal government bonds are considered the safest investments on the Brazilian market, as they are guaranteed by the government itself.
• Accessibility: With initial investments starting at R$30, Tesouro Direto is accessible to a wide range of investors, allowing even small savers to participate in the government bond market.
• Ease of access: Tesouro Direto's online platform makes the process of buying and selling securities simple and convenient, eliminating the need for intermediaries.
• Diversification: With different types of securities available, Tesouro Direto offers diversification opportunities within a single platform, allowing investors to build a portfolio in line with their objectives and risk profile.
• Liquidity: Some Treasury Direct securities, such as the Selic Treasury, offer daily liquidity, which means that investors can redeem their money at any time without facing major penalties.

CDB (Bank Deposit Certificate)

In the vast universe of low-risk investments, the Bank Deposit Certificate (CDB) stands out as a reliable option widely used by conservative investors in search of consistent and secure returns. Issued by financial institutions, CDBs offer an opportunity for investors to invest their capital in fixed-income securities, guaranteeing a predetermined return over a specific period.

How the CDB works

CDBs function as a kind of loan from the investor to the financial institution that issues them. By purchasing a CDB, the investor is actually lending money to the bank for a certain period of time. In exchange for this loan, the investor receives remuneration in the form of interest, which can be fixed, post-fixed or linked to some economic indicator, such as the CDI (Interbank Deposit Certificate).

• Pre-fixed CDB: In this case, the interest rate is set at the time of application and remains fixed throughout the duration of the bond. This gives investors predictability about the income they will receive.
• Post-fixed CDB: The remuneration of the post-fixed CDB is linked to an economic indicator, usually the CDI or the Selic rate. As such, yields vary according to the variation in these indices during the investment period.

Advantages of the CDB

The CDB offers a number of advantages that make it an attractive option for conservative investors:

• Security: CDBs are guaranteed by the Credit Guarantee Fund (FGC) up to R$250,000 per CPF and per financial institution, providing an additional layer of security for investors.
• Flexibility: CDBs offer a wide variety of maturities, allowing investors to choose the period that best suits their needs and financial objectives.
• Liquidity: Although some CDBs have a grace period for redemption, many offer daily liquidity or shorter maturities, allowing investors to access their money when needed.
• Competitive yields: Depending on market conditions and the type of CDB chosen, the yields offered by CDBs can be competitive compared to other low-risk investment options, such as savings or direct Treasury bonds.

LCI (Real Estate Credit Bill) and LCA (Agribusiness Credit Bill)

Real Estate Bills of Credit (LCI) and Agribusiness Bills of Credit (LCA) are low-risk investment options that offer investors the opportunity to participate in the real estate and agribusiness sectors, respectively. These fixed-income instruments are issued by financial institutions and are backed by financing granted to real estate and agribusiness projects, providing investors with security and profitability.

How LCI and LCA work

LCIs and LCAs work in a similar way to Bank Deposit Certificates (CDBs), but with one fundamental difference: the funds raised through these securities are earmarked to finance specific projects in the real estate and agribusiness sectors.

• Real Estate Credit Bill (LCI): The LCI is backed by real estate financing, such as loans for the purchase, construction or renovation of residential or commercial properties. The funds raised through LCIs are used by banks to finance the real estate market, while investors receive a return in the form of interest.
• Agribusiness Credit Bill (LCA): The LCA is backed by credit operations related to agribusiness, such as financing for agriculture, livestock, agribusiness and rural cooperatives. The funds raised through LCA are directed towards projects in the agribusiness sector, while investors receive interest as compensation for the loan.

Advantages of LCI and LCA

Investing in LCI and LCA offers a number of advantages that make them attractive options for conservative investors:

• Security: Like CDBs, LCIs and LCAs are also guaranteed by the Credit Guarantee Fund (FGC), providing an additional layer of security for investors.
• Income tax exemption: LCIs and LCAs are exempt from income tax for individuals, which means that investors can enjoy a higher net return compared to other fixed-income investments.
• Portfolio diversification: Investing in LCI and LCA allows investors to diversify their portfolios beyond traditional fixed-income investments, such as CDBs and government bonds, providing greater protection against sector-specific risks.
• Competitive returns: Depending on market conditions and the issuer, LCIs and LCAs can offer competitive returns compared to other low-risk investment options, such as Treasury Direct and CDBs.

Fixed Income Funds

Fixed income funds are an investment category that attracts many conservative investors looking for security and stability, while offering a convenient way to diversify their portfolios. These funds are made up of a variety of fixed-income assets, such as government bonds, private bonds, CDBs, LCIs and LCAs, among others, and are managed by specialized investment professionals.

How Fixed Income Funds Work

Fixed income funds function as pools of money invested in a variety of fixed income assets, with the aim of providing consistent and predictable returns to investors. Fund managers are responsible for selecting assets, monitoring performance and adjusting the allocation according to market conditions and the fund's investment policies.

• Assets Included: Fixed income funds can include a wide variety of assets, such as federal government bonds, private bonds issued by companies, CDBs, LCIs, LCAs, debentures, among others. The diversification of these assets helps to reduce risk and increase the stability of the fund's returns.
• Professional Management: The Fixed Income Funds are managed by investment professionals with experience and expertise in the financial market. These managers use economic and financial analysis to make investment decisions and maximize the fund's returns within the limits set by the investment policy.

Advantages of Fixed Income Funds

Investing in Fixed Income Funds offers a number of advantages that make them an attractive option for conservative investors:

• Diversification: Fixed income funds offer automatic diversification as they invest in a variety of fixed income assets. This helps reduce the risk associated with investing in a single asset or financial instrument.
• Professionalism: The funds are managed by specialized investment professionals, who have access to resources and information that may not be available to individual investors. This can help improve returns and reduce investment risk.
• Access to Diversified Assets: Investing in a fixed income fund gives investors access to a wide range of fixed income assets that may not be available to individual investors. This can include government bonds, private bonds and other financial instruments.
• Liquidity: Many fixed-income funds offer daily liquidity or short redemption periods, which allows investors to redeem their money when necessary without facing major penalties.

Savings

Although savings do not offer the highest returns, they are considered a low-risk investment option, since they are guaranteed by the Credit Guarantee Fund. However, it is important to note that, in some cases, other low-risk investment options can offer better returns than savings.

Factors to consider when choosing low-risk investments

When deciding where to invest your money, it's important to take into account a number of factors in addition to risk and potential return:

• Time horizon: If you have a shorter time horizon, you may prefer low-risk investments with higher liquidity, such as Selic Treasuries or fixed-income funds. If your time horizon is longer, it may be possible to take on a little more risk in search of higher returns.
• Financial goals: Your short, medium and long-term financial goals will also influence your investment decisions. If you are saving for a major purchase in the near future, you may prefer more conservative investments. On the other hand, if you are saving for retirement, you may be willing to take on a little more risk in search of higher returns.
• Risk tolerance: Every investor has a different tolerance for risk, and it's important to choose investments that are in line with your personal tolerance. If the thought of losing money keeps you awake at night, you're likely to prefer low-risk investments, even if that means potentially lower returns.

Investing money wisely is essential to achieving your financial goals, but that doesn't mean you have to take big risks. There are many low-risk investment options available that offer solid, consistent returns over time. By considering your needs, objectives and risk tolerance, you can create a diversified investment portfolio that will help you achieve your long-term financial goals. Always remember to do your own research or consult a financial professional before making investment decisions.

See also: Rent Adjustment: How much is allowed by law?

March 31, 2024