How does hybrid fixed income work and what are the advantages?
Learn all about hybrid fixed income and discover if this type of investment is worth it
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Have you ever heard of hybrid fixed income? If you are a conservative investor, that is, you prioritize security when investing, you are certainly familiar with this type of investment.
Hybrid fixed income securities are good options for those who want to avoid the low profitability of savings and make investments safely.
With that in mind, in today’s article, we’ll talk more about this investment option and show you its main advantages.
What is fixed income?
To better understand the subject, before anything else, it is important to know exactly what fixed income is.
Basically, fixed income is an investment category that offers predictable returns.
In other words, when you make the application, you already know what the return rate and term are.
Due to its predictability and security, fixed income is recommended for more conservative and beginner investors, as the risks are low.
What is the profitability of fixed income?
Profitability varies according to the investment made.
After all, fixed income offers several different types of investments, but with similar characteristics.
However, despite the name, profitability is not always fixed, which ends up confusing less experienced investors.
This is because some securities have a profitability that varies according to the index to which the security is linked.
Learn how titles are classified:
Prefixed title
Prefixed bonds are fixed income investments that have a fixed rate of return, for example, 9% per year.
This means that when investing in a fixed-rate security, at the time of contracting, you will know exactly how much you will receive on the maturity date.
In other words, regardless of what happens in the market, such as changes in the basic interest rate, the yield will remain the same until the end of the investment.
Post-fixed securities
Post-fixed securities follow an indicator, making the investment return linked to it.
This economic index can be the Selic or the CDI, for example.
This means that the investor will not know exactly how much he will receive on the maturity date, as the return may be higher or lower than expected.
Post-fixed bonds are recommended for those who want to build an emergency reserve.
Hybrid securities
Hybrid fixed income investments are made up of a fixed part and a variable part.
Therefore, the profitability will only be known when the security matures.
It is very common to see this type of security paying a fixed rate + IPCA, such as 5.0% + IPCA.
These investments are known for offering real gains to the investor, as inflation can reduce their purchasing power, especially in the long term.
In other words, it is a good option for those who want to obtain returns above inflation.
When is it worth investing in hybrid fixed income?
Hybrid bonds, although they do not offer as much predictability as fixed-income bonds, are safe investment options.
See what the main advantages of hybrid fixed income are, so that you can analyze whether this type of investment makes sense for your profile and financial goals:
Earnings above inflation
As we said, hybrid securities protect your capital in the long term and generate a good financial return.
Therefore, it is a highly recommended option for those who are thinking about the future.
Higher profitability than savings
This advantage is not exclusive to hybrid securities.
After all, fixed income investments, in general, offer a higher return than savings.
Savings have been constantly losing out to the Broad National Consumer Price Index (IPCA), which is the country's most important inflation index.
In other words, by keeping your money in savings, you are actually losing your purchasing power.
Investment diversification
You can invest in a hybrid fixed income security to diversify your investments and thus increase your earnings.
What are the main hybrid securities?
Now that you know how this type of investment works, it’s time to learn about the main options on the market.
Check it out!
IPCA Treasury
The IPCA Treasury is a public security issued by the Government.
When you invest in an IPCA bond, you are lending your money to the government, in exchange for an interest rate, which is hybrid.
Due to the increase in inflation in recent months, the demand for IPCA Treasury bonds has increased considerably.
Part of your remuneration is post-fixed, as it follows the IPCA, while the other part is prefixed.
There are several options for IPCA Treasury bonds on the National Treasury website. Each of them has a defined maturity date.
With just over R$ 30, you can already invest in government bonds.
CDB
The acronym CDB comes from Bank Deposit Certificate.
It is a fixed income security issued by banks to raise funds and finance their activities.
There are three types of CDBs: prefixed, postfixed or hybrid.
A hybrid CDB is a mix of a fixed-rate and a post-fixed-rate. In this case, it is most common to see an inflation index, used to protect the invested assets from price increases.
The disadvantage is that this is the least offered class on the market. In other words, it is easier to find prefixed or post-fixed CDBs.
LCI and LCA
LCI (Real Estate Credit Letter) and LCA (Agribusiness Credit Letter) are two types of fixed income investments that are exempt from Income Tax.
Hybrid letters of credit offer a fixed interest rate plus the IPCA. Therefore, they can be good long-term investment options.
After all, we need to remember that an investment that does not keep up with the inflation rate does not offer real returns.
Conclusion
Hybrid fixed income is a type of investment that offers certain advantages and disadvantages.
To choose the best option for your portfolio, take into account your investor profile, financial objectives, security profitability, maturity date and, of course, your current financial reality!
