FGTS to buy shares: is it possible?

At the end of October 2021, the government announced that Brazilians will be able to use their FGTS to buy Eletrobras shares.

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This news has certainly surprised many workers. Brazilian workers will be able to use part of the funds from the Severance Indemnity Fund (FGTS) for a more profitable investment.

But it's important to mention that for this to be possible, you have to follow the pre-established rules and conditions.

And if you're interested, read on. We'll tell you all about it.

Is it possible to use the FGTS to buy shares?

As a general rule, the use of FGTS to buy shares on the stock exchange is not permitted.

However, there have been situations in which this use has been permitted.

In the past, workers were able to use the FGTS to purchase Petrobras shares, Banco do Brasil and Vale.

The same will happen with Eletrobras, which will be privatized in 2022.

When this possibility is opened up, the investor needs to know what the main rules of the process are.

In the case of Eletrobras, it will be possible to use from R$ 200 of the FGTS funds, but it will not be allowed to apply more than 50% of the balance.

In addition, the profit will be taxed at 10% in the investor's income tax.

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How will the purchase of Eletrobras shares work with the FGTS?

The government has already authorized the privatization model for Eletrobras.

The capitalization process, through which the government will lose control of the company, will allow individuals to directly acquire the shares made available.

The resolution establishes that the privatization model allows for the indirect acquisition of shares through shares in privatization mutual funds (FMP), with resources corresponding to a maximum of 50% of the FGTS linked account balance.

Priority will be given to employees and retirees of Eletrobras and its subsidiaries to buy up to 10% of the total shares made available in the company's capitalization process.

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When is the withdrawal from the FGTS fund allowed?

Find out in which situations you can withdraw funds from your linked account:

- Unfair dismissal by the employer

- Termination of fixed-term contract

- After three uninterrupted years without a formal contract

- Buying or financing your own home

- Account holder or dependent with serious illness

- Retirement

There is also the FGTS anniversary withdrawal. In this case, the worker is entitled to withdraw a portion of the balance each year. However, if they are made redundant, they will not be able to withdraw the full amount.

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How can I use my FGTS to invest in Eletrobras shares?

As the use of FGTS to buy shares is generally not allowed, anyone interested in this possibility should pay attention to the news that will be released in the coming months.

Each investor (individual) will be able to use from R$ 200 reais from the fund to buy shares in the company.

The funds pool the money collected and entitle workers to Eletrobras shares. Workers can therefore buy a share in the FMP.

What is Eletrobras?

Eletrobras is the leader in electricity generation and transmission in Brazil.

The largest company in the electricity sector in Latin America, Eletrobras is a publicly traded organization (the capital consists of shares that can be traded on the stock exchange).

The privatization of this large organization has already been approved and is scheduled for the first quarter of 2022.

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Eletrobras shares: get to know and analyze ELET3 and ELET6

Eletrobras shares can be found under the tickers ELET3 and ELET6.

ELET3 is an ordinary share (ON), which confers voting rights and company decisions.

ELET6, classified as preferred (PN), gives preference when it comes to receiving dividends.

Every successful investor knows how important it is to diversify their portfolio so that they can increase profits and minimize losses.

In this sense, Eletrobras shares are considered interesting options. After all, we're talking about a large company with a solid structure.

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What are the advantages of using FGTS to buy shares?

When it comes to investments, there is no single answer for all investors.

While some experts say that using the FGTS to buy shares is a good option, others say it's important to be more careful.

To make this decision, the first step is to analyze the your investor profile. You also need to take your financial situation into account. 

After all, we're talking about the possibility of withdrawing money from a conservative income to invest in variable income (which presents more risks).

The main advantages include:

Profitability

The FGTS yields 3% per year plus the mental application of the TR (Referential Rate). However, in addition to the standard yield, the government uses the FGTS Profit Distribution to improve profitability.

In terms of investment, the FGTS is not very attractive (but in 2020 it did show higher returns than savings).

The profitability of a share, on the other hand, is calculated according to the variation in its price, i.e. its appreciation or depreciation over a given period.

Certainly, in the stock market, the possibility of getting much higher returns increases considerably.

Portfolio diversification

For those thinking of diversifying their portfolio, Eletrobras shares are a good option.

After all, you won't be withdrawing all your money from the FGTS, but taking a portion to invest in shares.

Are there any disadvantages to using FGTS to buy shares?

The main disadvantage is the systemic investment risk.

After all, the worker will need to analyze the options as if they were buying shares on the stock exchange.

In addition, there is the expense of the Funds' management fee, which can have an impact on the final profit.

Conclusion

Now you know that you can use your FGTS to buy Eletrobras shares in 2022 and thus diversify your income.

Take into account all the pros and cons and your investor profile. That way, you'll be able to make a decision that best suits your long-term financial goals.