Fixed income ETF: what it is, how to invest and the main options
Find out what a fixed income ETF is and the best options on the market
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Do you know what a fixed income ETF is? It is a good investment option for those who want to diversify their portfolio, but without giving up the security and low risk offered by fixed income.
In Brazil, this market is not yet as popular as it is abroad. However, this scenario is already changing, as the number of investors interested in ETFs has increased in recent years.
With this in mind, we have prepared an article to explain what a fixed income ETF is, how to invest, and the main options on the market. Let’s take a look at this together.
What is an ETF (Exchange Traded Fund)?
An ETF is an investment fund that uses a stock market index as a reference.
The composition is made with the aim of achieving yields equal to or greater than the indicator used.
This type of investment is managed by a specialized professional. Every day, they monitor the market to make the necessary purchases and sales to obtain good results.
ETF shares are traded on the stock exchange as if they were shares. Therefore, their performance fluctuates according to the performance of the securities included in their asset portfolio.
What is a fixed income ETF?
As you already know, ETFs are investments that replicate other indexes.
In other words, a fixed income ETF is a fund that is linked to other funds. fixed income investments, such as public and private securities, reflecting their variations and profitability.
What are the main fixed income ETFs?
Now that you know how these investments work, it’s time to discover the options available on the market.
There are currently seven fixed income ETF options available listed on the B3 – the Brazilian stock exchange. Check it out:
FIXA11
Mirae Asset Renda Fixa Pré is a fixed income fund that links its returns to the S&P/B3 Interest Rate Futures Index, calculated by S&P Dow Jones Indices.
It is a good option for those seeking exposure to fixed interest rates and government bonds linked to the Selic rate.
In other words, the purpose of the asset is to reflect market expectations according to the Selic rate (base interest rate).
Therefore, the FIXA11 ETF has relatively high volatility.
IB5M11
IB5M11 (IT Now IMA-B5+ Index Fund) is an ETF managed by Banco Itaú.
It replicates Anbima's IMA-B5+ index, which basically represents public bonds linked to inflation, with a term equal to or greater than 5 years.
The fund's portfolio is focused on NTN-B type assets. For this reason, it is recommended for those who want to protect themselves from inflation, especially in the long term.
It is possible to invest in this fund with just R$ 100.
IMAB11
IMAB11 replicates the IMA-B index.
This index fund tracks the profitability of a theoretical portfolio with post-fixed Treasury Direct bonds.
This means that its main strategy is to compose a portfolio of government bonds linked to inflation plus an interest rate.
B5MB11
B5MB11 is an ETF, launched by Bradesco bank, which tracks the IMA-B5+ DA Anbima index.
Its composition includes NTN-B bonds, which refer to Treasury Direct bonds with profitability linked to inflation plus a fixed interest rate with a maturity period equal to or greater than five years.
Also known as ETF Bradesco IMAB-5+ Index Fund, this ETF follows the same logic as IB5M11.
B5P211
This fixed income ETF focuses on short-term bonds.
In other words, it is a possibility for investors who are thinking in the short term, but with a certain exposure to inflation.
It replicates Anbima's IMA-B 5 P2 index, which brings together IPCA+ Treasury bonds and IPCA+ Treasury bonds with semi-annual interest.
With just R$ 100, you can start investing in this ETF.
IMBB11
The Bradesco IMA-B ETF was launched in 2019.
Its investment policy seeks to apply at least 95% of resources in the variation of Anbima's IMA-B index.
Its composition includes Treasury bonds linked to the IPCA.
IRFM11
IRFM11 is made up of a selection of fixed-rate Treasury Direct bonds.
The objective here is to reflect the performance of the IRFM P2 index.
What do you need to know before investing in a fixed income ETF?
Fixed income ETFs offer several advantages, such as the possibility of exposure to different financial investments.
However, to know if the ETF is really a good option for your portfolio, it is important to keep an eye on some factors, such as:
Fees
Fixed income ETFs have a low management fee.
The purpose of this fee is to cover the fund's management expenses.
Fee percentages vary depending on the ETF.
The B5MB11 ETF, managed by Banco Bradesco, for example, has an administration fee of 0.20% per year.
Taxation
Taxation must also be taken into account when investing in any application that is not exempt from Income Tax (such as letters of credit).
The rate depends on the average term of the securities that make up the ETF.
For ETFs that invest in bonds with a longer maturity term, the income tax rate is 15% on the amount invested. In addition, there is no incidence of come-cotas, a tax that falls on some investment funds.
Liquidity
The fixed income ETF with the greatest liquidity is IMAB11.
As the shares of these ETFs are traded on the stock exchange, you can count on greater flexibility when buying and selling.
However, you should always find out about the deadline for settlement on the stock exchange.
Conclusion
The fixed income ETF is a good option for those who prioritize the security associated with fixed income investments.
But before you start investing, it is important that you know exactly what your investor profile is, set financial goals and, of course, analyze the ETF portfolio.
