How much does the Agribusiness Letter of Credit (LCA) yield and how do you invest?
After all, how much does the Agribusiness Letter of Credit yield and how do you invest in this fixed income security?
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How much does the Agribusiness Letter of Credit (LCA) yield?
This is a common question for those interested in this fixed income investment, which is considered safe, as it is protected by the FGC.
Furthermore, with the increase in the Selic rate, which is the country's basic interest rate, fixed income securities are offering more attractive returns.
So, if you want to know how the yield of this investment works, what the main features are and how to start investing in an LCA, keep reading. We will explain how it all works!
What is an Agribusiness Letter of Credit (LCA)?
The Agribusiness Letter of Credit is a fixed income investment, exempt from Income Tax and issued by a financial institution or a bank.
In practice, when investing in an LCA, you are lending your money for a certain period, in exchange for a return.
The amount raised through an LCA is used mainly for loans to rural producers, who need these resources to acquire machinery and inputs, for example.
Therefore, by investing in an agribusiness letter of credit, you are indirectly helping to boost and develop the agribusiness sector in the country.
What is the difference between an LCA and an LCI?
The Agribusiness Credit Letter (LCA) and Real Estate Credit Letter (LCI) are two fixed income securities, exempt from IR, which raise funds for the development of the real estate and agribusiness sectors.
Basically, the difference is the focus of the investment.
While the LCA is aimed at agribusiness, the LCI is aimed at financing activities in the real estate sector.
The yield rate of letters of credit and the maturity date are established at the time of purchase of the security.
Furthermore, the availability of titles can also be considered an important difference.
This is because when the market is more favorable for investments in the real estate sector, it is common for more LCIs to be issued. The same goes for LCAs, when there is an expansion of agricultural activity in the country.
How much does the Agribusiness Letter of Credit (LCA) yield?
As they are low-risk fixed income investments, the LCA yield is almost always positive.
However, profitability varies according to some factors:
• Investment term
• Initial investment value
• Credit note from the issuing bank
When it comes to profitability, LCAs are available in three different forms. Find out what they are:
Prefixed LCA
In the prefixed LCA, the profitability is already presented at the time of purchase of the security.
In other words, you will know exactly how much you will receive on the title's maturity date.
Due to its predictability, it is considered a safer investment, highly sought after by beginners in the financial market.
Post-fixed ACL
These are incomes whose redemption value is linked to a variable rate, such as Interbank Deposit Certificate, or CDI.
For example, if an LCA yields 90% of the CDI, you will only know the final value of the yield on the maturity date of the bond, since the CDI may be higher or lower than when you purchased the bond.
It is the most common type of LCA on the market.
Hybrid LCA
Hybrid LCA combines the characteristics of the two previous types.
In other words, hybrid LCAs combine pre-fixed income (defined rate) with variable remuneration.
The fixed rate ensures the replacement of inflationary losses for the period in question, while the variable rate enables a real gain.
How to invest in an Agribusiness Letter of Credit (LCA)?
To apply for an LCA, you must choose a bank or an authorized securities brokerage firm.
Normally, brokers offer more profitable roles.
After opening your account with the brokerage firm, research the security you are going to buy. Analyze all the characteristics: minimum investment amount, profitability, maturity date, among others.
When it comes to letters of credit, it is possible to find bonds starting from R$1,000. However, the minimum investment amounts are usually higher.
What are the main advantages of the Agribusiness Letter of Credit (LCA)?
Now that you know how this type of investment works, it’s time to learn about the main advantages of LCA.
This way, you can know whether this investment is suitable for your investor profile, financial objectives and investment strategy.
Regarding the main advantages, we can mention the exemption from Income Tax (IR).
In other words, all profitability obtained through this investment is net.
The government exempts these investments, as they stimulate the expansion of infrastructure in the country, that is, they stimulate the economy.
However, despite being exempt from income tax, letters of credit must be included in your income tax return.
Another advantage of LCIs and LCAs is that they have the protection of the FGC (Credit Guarantee Fund).
What are the main disadvantages of the Agribusiness Letter of Credit (LCA)?
Low liquidity is considered the main disadvantage of letters of credit.
Generally, you cannot withdraw the money before the term, which is usually one to two years.
The investor may even try to make the withdrawal early, but in this case, it is common for institutions to charge a type of fine, which may affect the profitability or even part of the amount initially invested.
Conclusion
How much does the Agribusiness Letter of Credit (LCA) yield?
Now you know that there is no specific answer to this question, as the yield on these bonds can be fixed, post-fixed or hybrid.
Therefore, it is important to do research with your broker and better analyze the profitability of the available securities.
This fixed income investment is considered safe and low risk. However, before making an investment, take into account your investor profile, short and long-term goals, liquidity and, of course, your investment strategy.
This way, you can be sure that this investment is a good option for your portfolio.
