How to invest in fixed income? 5 steps to get started
Learn now 5 essential steps on how to invest in fixed income and start your financial investment now!
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When talking about financial security, many people automatically think about investing in fixed income.
After all, this type of investment is usually a great option, because, in addition to the financial profitability, the investments are generally low risk.
In general, investing in fixed income is recommended for investors with a more conservative or moderate profile or those who want to diversify their investment portfolio.
And if you don't know how to start, keep reading!
What is fixed income?
Fixed income is an investment in which the rate of return is pre-established, that is, predictable from the moment of investment.
For this reason, it is a highly sought-after investment option for those just starting out.
With this predictability, it is much easier to organize your finances. For example, let's say your goal is to take a trip in two years. Knowing how much money you will invest makes it easier to plan and achieve this goal.
For investors who take planning even more seriously, it is possible to create a series of investments with different goals, whether it is buying a car or saving money for retirement.
There are several types of securities for those who want to invest in fixed income. However, there are three basic types according to their yield.
- Fixed-rate securities: are those in which the profitability is known, such as 8% per year. In other words, regardless of the country's economic situation, the yield will be this.
- Fixed-rate securities: the income is linked to some indicator, such as, for example, Selic rate or the CDI. In this case, the yield cannot be measured with such precision. However, it is still possible to have predictability.
• Hybrid securities: combine the characteristics of fixed-rate and floating-rate securities. Hybrid securities offer protection against inflation.
Step by step guide to investing in fixed income
If you consider yourself a more conservative investor, or if you want to diversify your portfolio of financial assets, it is worth investing in fixed income.
Here's how to get started:
1. Define your financial goals
Every successful investor sets financial goals.
In other words, if you want to have more motivation, discipline and consistency when investing, it is essential to think about your financial goals.
What do you plan to do? Save money for your children's college tuition? Buy a house outright? Travel abroad?
You can set more than one financial goal. However, it is important to establish priorities, to define what you want to achieve first.
2. Do some financial planning
Financial planning is related to your financial goals. But here, the concept goes a little further.
When planning, it is important to know exactly how much you earn per month, how much you spend on essential expenses (rent, food, etc.) and how much you can set aside to invest.
Experts recommend that you set aside around 20% or 30% of your earnings to invest.
However, the amount allocated for this purpose may vary depending on your current financial situation.
If you can only invest 5% per month, great, as long as you commit to setting aside that amount every month.
3. Choose an authorized brokerage firm
Open an account with a stockbroker, transfer your money and enjoy the variety of options that a good broker will make available to you.
There is also the option of investing in fixed income through banks. However, brokerage firms usually offer a greater diversity of financial products.
Regardless of whether you choose a brokerage firm or a bank, it is very simple and accessible to start investing in fixed income.
4. Choose an investment
This is pretty much the most important part.
There are several fixed income investments. Among them, we can mention:
• Direct Treasury
• DI Funds
- CDB (Bank Deposit Certificate)
• LCI (Real Estate Credit Letter) and LCA (Agribusiness Credit Letter)
• LC (Bills of Exchange)
All of these financial products are considered fixed income investments.
The best option is the one that offers the highest profitability, has liquidity and helps you achieve long-term goals.
However, there is no exact answer. It may be that Tesouro Direto is the best option for you, or you have found a CDB that is more suited to your financial goals.
If you can, choose more than one type of investment! After all, the more you diversify your asset portfolio, better.
Almost all investment platforms provide fixed income simulators so you can simulate your earnings from investments.
5. Diversify your portfolio
As we just said, it is very important to diversify your asset portfolio.
In fact, even if you have a more daring profile (willing to take greater risks in exchange for high profitability), it is worth considering fixed income, because of the liquidity and security of this type of investment.
In addition, there are fixed income investment options that have significant returns.
What are the main advantages of investing in fixed income?
You already know how to start investing in fixed income. But now, it's time to learn about the main advantages that this type of investment offers:
• Predictability: A good investor has defined goals for the short, medium and long term. However, since fixed-yield financial products are more advantageous in the long term, they are excellent options for profitable and predictable investments that fit with future goals.
• Security: Without a doubt, security is one of the main characteristics of fixed income investments. Some of them are as safe or even safer than traditional savings.
• Liquidity: Liquidity refers to the potential that an asset or investment has to be converted into cash. Because of the large volume of transactions, there is investment in fixed income with high liquidity.
There are also fixed income investments that are exempt from income tax, such as LCIs and LCAs.
Conclusion
Investing in fixed income is something that every investor should consider, whether they are a beginner or experienced, bold or conservative.
After all, it is a safer investment option than variable income and allows you to diversify your portfolio.
