American fixed income: get to know the main securities
Have you ever thought about investing in American fixed income? Understand the process better and learn how to get good results
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For more conservative investors, American fixed income is certainly an interesting investment option.
These securities are sought after by people who want to make investments, but in a safe way, that is, without taking risks.
For this reason, the interest in making applications in fixed income abroad increased. In fact, the benefits of investing directly in the US stock market, instead of BDRs, became better known.
However, if you want to invest in American fixed income, you need to know that there are great possibilities!
In this article, we will talk more about the subject. Keep reading and learn!
What are fixed income securities?
Fixed income securities have defined remuneration rules.
In other words, they are securities whose yield is known in advance (prefixed securities) or which depends on indexes (post-fixed securities).
In Brazil, the main economic indexes are the CDI, the Selic (the economy's basic interest rate) and the IPCA.
In the United States, there are other categories. In any case, they are similar to the Brazilian ones.
U.S. Treasury securities, which consist of bonds and debt securities, are issued by the United States Department of the Treasury.
Treasuries, as they are also called, are known for their security. And that is why they attract the attention of conservative investors or even the most daring ones, who want to diversify their asset portfolio.
Because US Treasury bonds are linked to the world's largest economy, they are among the most protected on the market. In other words, the risk of default is extremely low.
What are the main risks of investing in fixed income in the USA?
As we said, we are talking about a category of investments that offers a lot of security.
However, there is a possibility that some problems may occur.
The most common of these is the loss of profitability, since fixed income securities are linked to an index. This means that variations can affect the remuneration.
American fixed income: what are the best securities to invest in abroad?
There are several fixed income securities in the US, each with its own characteristics.
In this article, we will talk about the two main ones: Bonds and CDs.
Bonds
Bonds are debt securities issued by government agencies or publicly traded private companies.
They are equivalent to Tesouro Direto in Brazil.
Through the issuance of Bonds, governments and private companies borrow money on the market.
The investor who acquires this security has the right to receive his money again upon payment of an interest rate, which is the remuneration.
Profitability is defined at the time of contracting.
The advantage is that American Bonds are among the safest in the world, as there is a guarantee that all creditors will be paid on time.
US Treasury bonds differ in terms of maturity and characteristics. Here are the main ones:
Treasury Bills
Also known as T-Bills, this security is recommended for those who are thinking of investing in the short term.
Its maturity is up to 52 weeks (one year).
Treasury Notes
T-Notes mature in terms of two to ten years.
Therefore, it is an interesting option for those who are thinking in the medium and long term.
Currently, T-Notes are issued with maturities of 2, 3.5, 7 and 10 years.
One of the main advantages of these bonds is the semi-annual interest payment.
As with other fixed income securities, Treasury Notes fluctuate according to the mark-to-market, which is the daily update of the prices of the assets in the portfolio.
Treasury Bonds
T-Bonds are recommended for investors who are thinking long-term, as they are bonds with maturities of over 10 years.
Both T-Notes and TR-Bonds feature semi-annual interest payments, as does the NTN-F, a Treasury Direct bond in Brazil.
It is important to remember that the longer the maturity of the security, the greater the volatility it may present.
Certificate of Deposit (CD)
Certificates of Deposit (CDs) work in a similar way to Treasury Bonds.
The difference is that in this case, the issuer of the title is the banks and financial institutions.
They are very similar to Bank Deposit Certificates (CDBs) in the Brazilian market. In other words, the objective of banks and institutions is to raise funds to finance their activities.
On the maturity date, the investor will receive his money back, plus interest.
What are the advantages of investing in American fixed income?
There are several reasons to invest in American fixed income.
Bonds, for example, are consistent and predictable. Therefore, they are safe options for those who want to take fewer risks.
Additionally, these fixed income securities help you plan for future goals.
Regarding CDs, we can say that the main advantage is income stability.
It is also a good option for you to diversify your asset portfolio and, thus, increase your profits in a safe way.
How to invest in US fixed income securities?
You will need to open an account with a brokerage firm in the US.
It is possible to do this as a foreigner and/or non-resident. An interesting option is to invest in American fixed income through Exchange Traded Funds (ETFs).
It is also possible to carry out the operation via shares. These two alternatives tend to have lower costs.
However, you will need to register on a platform to make international transfers.
A good option, in this case, is Online Shipping, which, in addition to being a reliable company, has lower costs.
In fact, depending on the case, the bank fee may be waived.
Conclusion
Now you know what American fixed income is and what the main bond options are.
Despite the risks, fixed income securities continue to be safe and more stable options. For this reason, they are good investment alternatives for the medium and long term.
As you can see, there are several opportunities to invest abroad.
Therefore, if you have a conservative/moderate profile or want to diversify your portfolio, it is worth considering fixed income securities in the USA!
