Investor profile, do you know what yours is?

Knowing your investor profile can be the difference between making the right choice when investing, or taking more risks than you should. Read on and learn more about what it is, what types there are, and the recommended investments for each investor profile!

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If you are interested in researching investments and finance, you have probably come across the term “investor profile” several times. This is a term used by those involved in the investment world to differentiate between the many styles of investors.

So, both those who want to have a more comfortable retirement, protect your inflation equity or simply get rich fits a specific investor profile. The purpose of this is to help experts when recommending or making investments.

The investor profile is a guide for your journey as an investor. Which path to take depends on your profile, which investments and which assets are suitable for you, and knowing your profile is the first step for those who want to start investing the right way.

What differentiates one profile from another depends on certain requirements that each of us has in relation to money, risk, market knowledge and our goals. So let's understand more about what the investor profile is and which one you fit into!

So, keep reading and find out all about:

  • What is an investor profile?
  • Why is it important to know the investor profile?
  • What are the types of profiles?
  • What investments are recommended for each type of profile?
Perfil de investidor

What is an investor profile?

The investor profile is a classification that each person who invests their money in an investment product receives, and is associated with the risk they are willing to take. Basically, it is a measure of how much money an investor would be willing or able to put at risk.

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But this classification is not just to guide the investor when making an investment. It is a requirement of the Securities and Exchange Commission (CVM), which is responsible for regulating all investments, financial applications, the institutions involved and everything else.

To be more precise, in its instruction No. 539, The CVM provides information on the investor profile in its chapter II, articles 2 and 3. In these two articles, the CVM explains how to verify people qualified to make investments, step by step.

This way, it is possible to know whether the operation or service is suitable, whether the financial situation is compatible, what the level of knowledge about investments is, how long you want to maintain the investment, your risk tolerance and your purposes.

By answering this questionnaire, we discover our investor profile. And there are three distinct types of investors: conservative, moderate and aggressive (or bold).

Depending on your investor profile, some investments will be perfect for you, while others you should stay away from. This is all to make it easier when making an investment decision and to reduce the chance of making mistakes.


Why is it important to know the investor profile?

The financial market is full of investment options, but not all of these options can or should be used by everyone indiscriminately. Which investment is best suited to a given person is determined by their investor profile..

In other words, when an investor with a certain profile – the conservative profile, for example – is faced with an investment that is more suitable for another profile – the investor with an aggressive profile – this investment will not be suitable.

The results will not be what the investor originally wanted, and the risks may be very different from what the investor can handle. It is worth noting that there are no types of investments that are worse than others, but each one requires a certain amount of financial investment and offers different risks.

That is why it is very important that each investor completes a questionnaire or form to determine which profile best fits their personality.

When we find out what risk limit we can handle, we will not choose a different risk investment. This helps in the investment selection process, not only to suit the investor's taste, but also to their pocket and tolerance for losses.


perfil investidor

What are the types of profiles?

There are three main types of investor profiles, and who defined what they were was the Brazilian Association of Financial and Capital Market Entities (ANBIMA), and the three types are: conservative, moderate and aggressive (or bold). Let's understand each of these three profiles:

Conservative investor profile

This profile, as we can guess from the name, is more risk averse. They prefer to invest in products that have very low or no risk, and they don't mind receiving less if the profitability comes without these risks.

Therefore, this type of investor prioritizes security above all else when investing.

But make no mistake, this profile is not for those who have little money to invest and are afraid of losing what little they have. It is also suitable for beginner investors who just want to take their first steps and learn more about the market over time.

Or the retired investor, who doesn't want to risk what he has saved and fought all his life to achieve, and also doesn't want big emotions and taking big risks.


Moderate Investor Profile

Initially, this profile is exactly halfway between the other two. The moderate investor already has a higher tolerance for risk, even because he wants higher returns than the conservative investor.

This profile is suitable for those who already have some knowledge about the financial market, how it behaves and the different products that exist. But they still don't know how to carry out a more detailed or technical analysis.

This is a versatile profile, as it accepts both fixed income and variable income investments, and can diversify its investments much more. In reality, this is the profile that is most recommended for all investors, as it is the one that seeks the most balance between risks and returns.


Aggressive (or bold) Investor Profile

The aggressive profile refers to those who prioritize profit and are not interested in the risks associated with a higher return. Security comes second, and so they can invest in high-risk products. But with much higher returns.

Investors with this profile look for short or very short-term operations, where the price can jump from one moment to the next, but the profitability for those who are paying attention is very high.

The loss can also be very high, however, investors with this profile have taken the risk and do not care so much about it.

This group is the one with the most training and instinct for the financial market, they know how to read charts and follow market trends.

What investments are recommended for each type of profile?


But now, have you taken your investor profile test and want to know which investment is best suited to each person?

Well, here we have separated some investments for each investor profile. Please note that these are not the only options, but with them we can already get an idea of what each investor profile prefers when buying a product.

Investments for the conservative profile

As we have already said, this profile does not like risks and does not mind having a lower return at the end of the investment.

People in this group should certainly invest money in savings, but there are certainly many opportunities for better returns. Here are five investments for the conservative investor:

Bank Deposit Certificates (CDB),

The first on our list and the best known. They are guaranteed by the FGC (Credit Guarantee Fund) in investments of up to R$250,000 per CPF. The most common type of CDB in which the conservative profile will invest is the post-fixed CDB, since it follows the basic interest rate and protects the investor from fluctuations in the Selic rate.

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DI Funds

These are fixed income funds with daily liquidity, so that conservative investors can recover their money if they wish, at any time. DI investments attempt to follow the profitability of the CDI (Bank Deposit Certificate), which follows the Selic rate.

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Fixed Income Funds

Fixed income funds work very well for the conservative investor, since at least 80% of the amount is invested in physical income products, such as CDBs, titles of the treasure and others.

Investment management is done by a professional, which adds another layer of security so that conservative investors can worry less about their investment. In addition, these funds are a great way for conservative investors to diversify their portfolio, as they have a variety of different securities.

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LCAs and LCIs

Letters of credit, both for real estate and agribusiness, are very well accepted by conservative investors. These securities serve as a form of loan to finance projects and the investor is remunerated with the interest arising from the loan.

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Investments for the moderate profile

In the case of the moderate investor profile, we often take into account the percentage of the amount invested in each investment category rather than which investment was chosen.

It may be the case that a moderate investor decides to invest half of all the capital he has to invest in fixed income, a quarter in debentures and a quarter in shares.

 He takes a few risks, but remains safe. Here are some investment options for this profile:

IPCA Treasury

In fact, this is not an investment with high market risk, as it is guaranteed by the Federal Government. However, it does present liquidity risks, which are not well accepted by conservative investors.

It is also not seen by aggressive investors, as its yield (despite being above inflation) only shows long-term results.

Debentures

In advance, these are a very attractive option for moderate investors. They are securities of companies in the private sector, which need liquidity to finance their businesses, and therefore have a much better return.

However, they already present greater risks, as they are not guaranteed by the FGC.

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Investment funds

These investments work through a quota system, where a professional manager will assemble a portfolio and sell these quotas to investors.

Moderate investors can have percentages in riskier funds, with variable income. But always counting on the help of a professional manager to control the risks. Even so, it yields well, but conservative investors would not like these risks, and aggressive investors do not want to outsource the management of the funds.


Investment for the aggressive (or bold) profile

The portfolio of people with an aggressive investment profile can be very diversified, depending on the investor's objectives.

Many, however, still maintain an investment in safer securities, to have some emergency reserve if needed, but they much prefer short-term profits. Let's look at some investments for this profile:

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Logically, this would be the first investment chosen for the aggressive investor profile.

These are the best-known variable income investments and are exposed to price volatility. However, they yield a lot and can be traded all day long – aggressive investors like to day trade and look for opportunities for fluctuations in the stock market.

This type of investment requires more advanced knowledge of the financial market, and even those who understand it well run many risks. Therefore, other profiles may not find this a very attractive option.

Equity funds

These are collective investments where a manager will manage the capital provided by investors. The manager may have a passive or active attitude in managing the fund, and the fund may be more or less risky.

BDRs

The BDRs are investments much loved by aggressive investors who wish to invest abroad. In short, Brazilian Depositary Receipts are assets issued in Brazil, of shares in companies abroad.

The securities are traded on the Stock Exchange in Brazil, but represent shares that are traded on exchanges in other countries, such as NASDAQ, for example.

The risk associated with investing in a share of a foreign company is very high, even for an investment in a depositary bond of this share, and therefore this investment is more suitable for aggressive investors.

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