If you want to save, invest safely and take care of your money, you need to know about fixed income investments. So, find out what it is, how it works, and the best options for fixed income applications in this article!

What is Fixed Income?

Fixed income investments have predictable profitability since their calculation is defined and known from when the person decides to make the investment. There are several options for applications in this type of investment.

Check out examples of Fixed Income products: 

  • CBD;

  • Direct Treasure;

  • LCI and LCA;

  • Bills of Exchange;

  • CRI and CRA;

  • Debentures

The issuers of the above investments are varied. These can be private institutions, such as banks and companies, and public institutions, such as the Federal Government or state-owned companies. This will be determined according to each product, as each one of them has different characteristics and emitters.

How do fixed-income investments work?

This type of investment works as if it were a loan of money to those who issue the bonds. In exchange, the investor receives the invested amount plus interest, with a fixed rate of return established at the acquisition time.

Regardless of the issuer, the general functioning of the papers is similar. The amount raised by the bond issuer can be used to pay debts, finance projects or even develop specific areas, such as real estate and agribusiness (LCI and LCA), for example.

However, it is important to know that fixed income does not bring guaranteed returns. This type of investment is also subject to credit and market risks. Depending on the case, the value of the paper can vary in the same way as a share. Therefore, it is essential to know them well.

What is the fixed income?

The remuneration usually varies according to the type of paper, term, and issuer. The three traditional ways of earning fixed income are as follows:

prefixed papers

This type of application has fixed interest established at the time of its launch. Thus, the investor can calculate in advance how much he will receive at maturity.

Post-fixed papers

These investments have remuneration linked to reference indicators, such as the Selic or the CDI rate. Thus, the value of the bond is updated according to these rates. Although the investor knows what the indicator is, he cannot be sure how much he will receive at maturity, as it depends on the rate variation.

hybrid papers

They are those that mix the characteristics of pre-fixed and post-fixed investments. Thus, part of the remuneration is calculated based on fixed interest and the other based on an indicator that varies. 

7 Fixed Income investments better than savings

1. Direct Treasure

These are federal public bonds made available by the Federal Government through the National Treasury to finance domestic debt. In this way, the investor lends money to the Government and receives the invested amount plus interest. 

Treasury yields can be fixed-rate, post-fixed, varying according to the Selic, or even hybrid, according to the IPCA+, which adds the IPCA to a fixed rate. 

2. Bank Deposit Certificate (CDB)

CDBs are issued by banks to raise funds to finance their activities. These amounts are intended for loans and other banking operations. Normally, these are post-fixed investments, which use the CDI as a reference. 

3. Real Estate Letter of Credit (LCI) and Agribusiness Letter of Credit (LCA)

These bonds are issued by financial institutions, and their resources are earmarked for the real estate market and agribusiness, respectively. These papers can be either fixed-rate or floating-rate, with the great advantage of being exempt from Income Tax.

4. Debentures

Debentures are used by companies that need to raise funds to finance their projects. Its profitability can also be fixed-rate, floating-rate, or hybrid, according to the security company issuing.

5. Bills of Exchange (LC)

This type of application is very similar to the CDB, but the LCs are issued by financial institutions, not banks. These bonds are usually floating rates or hybrids.

6. Certificates of Real Estate Receivables (CRI) and Certificates of Agribusiness Receivables (CRA)

In the same way as LCI and LCAs, the resources of these bonds are destined for the real estate sector and agribusiness. The difference is that they are not subject to Income Tax. Its profitability is usually post-fixed or hybrid.

7. Fixed Income Funds

Funds are not exactly an application, but a way of investing in fixed income products. In funds, a large part of the net worth is invested in investment fund shares or directly in public or private securities.

When the investor buys a fund, he becomes a shareholder and delegates to the manager the task of buying good fixed income assets, according to the fund's mandate. However, funds often charge management fees, which can reduce investor returns.

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He holds a master's degree from Columbia University's Graduate School of Journalism. Send business and startup tips to chandev@downkyamal.com