Bill of Exchange (LC): what is it and how to invest?

Discover how investing in bills of exchange works

Bill of Exchange (LC) is a fixed income investment, which works in a similar way to the Bank Deposit Certificate (CDB).

But before investing in this asset, it is important that you know its main characteristics.

This way, you can know if the LCs are really a good option for your investment portfolio.

With this in mind, we created an article to answer the main questions about this fixed income security.

To learn more, continue reading.

What is a bill of exchange (LC)?

A bill of exchange is a fixed income investment issued by financial institutions.

As we said, it works in a similar way to CDBs. In other words, you are lending your money to the institution. In return, you will receive the invested capital plus a remuneration on the set date.

The yield can be fixed, linked to the Interbank Deposit Certificate (CDI) or combined with a fixed rate plus the IPCA.

But, after all, if the CDB already exists, why invest in an LC?

Firstly, because you can find a bill of exchange within the term you intend to invest and with a good profitability.

Furthermore, it is a safe option for you to diversify your asset portfolio and, thus, maximize your gains.

Bills of exchange are protected by the Credit Guarantee Fund (FGC).

What are the types of bill of exchange (LC)?

The profitability of LCs depends on the chosen title.

However, rates may also vary depending on the institution. Check the yields for each type of asset:

Prefixed LC

If you invest in a fixed-rate LC, at the time of contracting, you will know exactly how much your money will yield during the period.

This option is usually advantageous if interest rates fall within the investment term. However, it will have a lower return than the real one if the interest rates start to rise.

Post-fixed LC

Post-fixed LCs have a yield that varies according to the CDI. In other words, you will only know the real profitability when the investment matures.

However, when using the fixed income investment simulators, You can predict how much the money will yield until the due date.

If the bill of exchange indicator rises, yields also increase.

Hybrid LC

The hybrid LC is basically a mix of both options.

Part of its profitability is linked to fixed interest rates and the other part to an index, such as the IPCA (Broad Consumer Price Index), which is the indicator considered the official thermometer of inflation in the country.

For this reason, it is the most suitable investment for those who want to maintain purchasing power and obtain real gains over inflation.

How to invest in a bill of exchange (LC)?

The first step is to use a good stockbroker.  

When you create your account, you will have access to LC options and other fixed income and variable income assets.

But before making any investment, it is important that you check the main characteristics of the security, such as maturity date, profitability, risk level, etc.

Once you have chosen the title you wish to purchase, you must add the corresponding amount to your brokerage account and then make the investment.

What is the minimum amount to start investing in LCs?

This is one of the main disadvantages of LCs compared to CDBs.

Generally, LCs have a higher minimum investment value.

It is common to find bills of exchange with a minimum value of R$ 10 thousand, and the amount cannot be redeemed before the due date.

In this case, if you need to withdraw the money before the deadline, the best option is to try to sell the bond to someone else. However, this can harm the profitability.

Therefore, if your goal is to build an emergency fund, the ideal is to think about other fixed income investment options, such as post-fixed CDBs or Tesouro Selic.

However, if your focus is on the medium and long term, bills of exchange are a great option for your portfolio.

After all, we are talking about a safe fixed income security with good remuneration rates.

Furthermore, it is important to mention that LCs with longer maturity terms usually offer higher profitability.

What are the risks of investing in an LC?

LCs are considered safe applications.

In fact, the FGC guarantees the return of the investment up to the limit of R$250,000 per CPF.

In addition to having this insurance, investing through a reliable broker is the best option for you to have more security and peace of mind when investing.

How does LC taxation work?

The bill of exchange is subject to Income Tax, that is, it is a taxable investment.

The longer the investment period, the lower the rate to be paid.

See what the bands are according to the application period:

• LC of up to 180 days: 22.5% tax.

• LC from 181 days to 360 days: 20% tax.

• LC from 361 days to 720 days: 17.5% tax.

• LC over 720 days: 15% tax.

LC x CDB: which is the best option?

Both LC and CDB are fixed income investments considered safe, as they are protected by the FGC.

The main difference between the two is the issuer, since the LC is issued by financial institutions and the CDB by banks.

To define the best option for your portfolio, the ideal is to analyze the profitability rates, maturity date and quality of the issuer.

The advantage of CDB, in this case, is that it usually has more securities available for investment.

Conclusion

The bill of exchange is a good option for those who want to invest safely and avoid the low profitability of savings.

Before making the investment, check the profitability, initial value and investment term. This way, you can choose the most profitable investment that is best suited to your financial goals.