Tesouro Selic, how does it work? Get all your questions answered!

Known as one of the most stable investments in the country, the Tesouro Selic yields a return that is subordinate to the basic interest rate. Learn all about the security and the benefits of investing in it.

The Tesouro Selic is a fixed income security highly recommended for beginner investors and those looking for alternatives to savings. This is because it has a more attractive return and is one of the lowest risk investments on the market.

Considered an investment accessible to all investor profiles, the Tesouro Selic is interesting for financing investment goals. long term, such as purchasing a property, vehicle or retirement plan and your initial investment is low.

This security typically matures in 4 to 5 years. After redemption, you can reinvest the amount withdrawn (initial investment + investment income) in a new security.

Continue reading and check it out:

• What is Tesouro Selic and how does it work?
• What is the yield?
• What are the advantages and disadvantages of the Selic Treasury?
• What is better, Tesouro Selic or CDB?
• Other Types of Direct Treasury
• Pre-fixed Treasury
• IPCA Treasury
• How to invest?

What is Tesouro Selic and how does it work?

The Tesouro Selic is a fixed-rate public bond belonging to Tesouro Direto, that is, issued by the National Treasury. When you invest in this security, you are lending money to the federal government for a certain period and receive a remuneration corresponding to the Selic interest rate, which is the basic interest rate in Brazil. Its minimum price varies daily and its yield is calculated in the form of compound interest.

The government uses the resources raised with the Tesouro Selic to invest in important sectors such as health, infrastructure and education. This asset was previously called LFTs – Treasury Financial Letters.

What is the yield?

Treasury Direct bonds are fixed income public securities that can be of two types depending on their profitability: pre-fixed e postfixed. The Tesouro Selic is linked to an interest rate that can change every 45 days and for this reason its interest rate is post-fixed. In other words, when investing in this asset you will have a fixed annual remuneration added to the Selic rate for the period.

The Selic rate remuneration is defined by the variation in the rate recorded daily between the date of purchase and the maturity date of the security. Its monthly profitability corresponds to 100% of the annual Selic divided by 12 months. Thus, if the basic Selic rate is 4.3% per year, dividing by 12 you will have an approximate yield of 0.38% per month.

What are the advantages and disadvantages of the Selic Treasury?

Let's now look at the main advantages and disadvantages of investing in Tesouro Selic.

Advantages of the Selic Treasury

Better profitability compared to savings

In 2019, when the savings account yield was 4.26% – even losing out to annual inflation, which was 4.31% – the Selic rate closed the year at 5.79%. In 2020, in the context of the economic instability generated by the Covid-19 pandemic, savings accounts ended the period with a negative return of -2.30%, while the Selic rate ended at 2%.

More profitable option than savings

Both scenarios show a trend that does not change. The Treasury Selic always presents itself as a more profitable option than savings. This difference has been greater in other periods, such as in 2016 when the former reached 14 percentage points against 8.30 for the latter.

High Liquidity

Liquidity corresponds to the degree of ease in converting the investment into cash, that is, in redeeming its income.

The Tesouro Selic has high liquidity because it can be redeemed within one business day, since the National Treasury repurchases issued securities every day. This characteristic makes this investment the best option for investors who want to build up an emergency reserve.

A more affordable investment

The minimum investment amount for Tesouro Selic is 1% of the value of the security, with a minimum limit of R$ 30.00. Currently, Tesouro Direto is offering Tesouro Selic 2024 in the full amount of R$ 10,908.27, and the minimum investment is R$ 109.08.

The lowest risk

The Tesouro Selic is the lowest risk investment on the market. When you buy government bonds, you become a creditor of the federal government, and here the chances of default are very remote.

This is because, even when facing cash flow difficulties, the government has the freedom to interfere in the country's economy, and can even print paper money to pay off debts that cannot be defaulted on.

If the government goes bankrupt, the whole society goes bankrupt, which includes the big banks that have a lot of money invested in it.

Another interesting point is the fact that, as long as the minimum period of 29 days after purchasing the security is respected, if the investor needs to redeem it before maturity, there will be no IOF tax. The profitability is updated daily, and therefore its profitability is never negative.

Low cost

The investment costs in Tesouro Selic are reduced when compared to other securities on the market. However, it is necessary to be aware of the investment's maturity dates to obtain the best profitability.

Currently, several brokerage firms operate in the market with zero fees for investments in Tesouro Direto – custody fee and brokerage administration fee. The incidence of Income Tax on the amount at the time of redemption of your investment varies according to a regressive table.

As you can see, the longer it takes you to withdraw your investment, the lower the IR paid, according to the tax rate.

Disadvantage of the Selic Treasury

The disadvantage of buying Treasury Selic bonds is that this bond – like the others belonging to Tesouro Direto – does not have coverage from the Credit Guarantee Fund (FGC), such as LCI, LCA, CDB and Savings.

However, as the risk of government bankruptcy is lower than the risk of any financial institution in the country, in a scenario of generalized crisis, all other fixed income issuers would go bankrupt before Tesouro Selic.

What is better, Tesouro Selic or CDB?

The Tesouro Selic and the CDB are fixed income investments with a high degree of stability. The first because it has the federal government as its creditor and the second because it has the coverage of the Credit Guarantee Fund.

If you do not have the resources to invest in both securities, as this would be the best option for diversifying your portfolio, analyzing profitability is the best decision criterion.

When the profitability of the CDB exceeds 100% of the CDI, you already have a gain above the Selic. If the CDB is less than 100% of the CDI, you should opt for the Tesouro Selic, which many experts claim is the safest investment in the country. This comparison is due to the similarity between the CDI and the Selic rate.

CDBs with returns higher than the CDI are constantly offered on the market. Sometimes it is possible to find securities with returns of up to 200% of the CDI. These more attractive securities are offered by small banks, unknown to most investors.

Smaller banks are more likely to experience financial problems and face bankruptcy, which is not so common. But even in the event of bankruptcy, since the investor is insured by the FGC, he will have his investments reimbursed within a period of up to three months.

When purchasing securities from smaller institutions, the best option is always diversification and not concentration in just one bank.

Other Types of Direct Treasury

In addition to Tesouro Selic, Tesouro Direto offers two more bonds for raising capital from investors with different profiles.

As we have already discussed, when investing in government bonds you are lending money to the Union and when this investment matures, you receive the money invested plus the income.

Let's take a look at the two Treasury Selic bonds that the government issues for investors to purchase.

Pre-fixed Treasury

Pre-fixed Treasury bonds offer bonds with a variety of maturity dates and yields. These bonds have an interest rate that is defined in advance, such as 6.3% per year, for example, which allows the investor to know how much they will receive at the end of the investment. Or when there is a forecast of a drop in interest rates.

This title also offers the option of payment with semi-annual interest and therefore there is no need to wait for the due date to receive income.

In fact, this option is very interesting for those seeking a passive income every 6 months, which however limits the action of compound interest in the long term. With the semi-annual receipt, the amount initially invested starts to yield again.

IPCA Treasury

The IPCA Treasury provides bonds that follow the IPCA inflation rate, such as 3.8% + IPCA. Therefore, if inflation increases, the gain in profitability from investing in this bond also increases.

The IPCA Treasury is known for offering a real gain to its investors by covering inflation, maintaining purchasing power in the future (your money does not lose value) or composing an investment for retirement.

Just like the Pre-fixed Treasury, with the IPCA Treasury the investor also has the option of payment with semi-annual interest.

How to invest?

To invest in Tesouro Selic, or another Tesouro Direto bond, you only need to open an account at a financial institution, be it a bank or a brokerage firm authorized to invest in the investment you want.

These institutions act as custody agents that register investors with BM&F Bovespa, mediating the transfer of invested amounts and securities.

Thus, the securities purchased by the investor remain in their custody account at BM&F Bovespa, in their name, earning interest until they are redeemed. From then on, you can buy and sell Treasury Selic bonds and other securities through three channels.

• Direct Treasury Website
• Investor platform on your financial institution's website
• Authorizing your institution to trade securities on your behalf, an option that not all institutions offer
• Your Stockbroker's Platform

When choosing a brokerage firm to invest with, you will follow these steps:

1 – Open your account by filling in your personal details and creating a login and password

2 – Transfer the amount you wish to invest in Tesouro Selic from your bank account to your brokerage account. This transfer is completed within 24 hours via DOC or TED.

3 – On your broker's platform, choose the 'Fixed Income' option and select the 'Direct Treasury' option;

4 – Select the Selic Treasury available for investment,

5 – Enter the amount you want to invest, the date and invest

Conclusion

The Selic Treasury It is one of the most recommended investments for those looking for a safer and more stable income to finance their goals. long term such as buying a property or car or dealing with unforeseen events, by creating an emergency reserve, for example.

With a profitability normally close to 100% of the CDI, your capital has a return convergent with the market and your redemptions can be made at any time, with the corrected amount available in your account within 1 business day.

Even in the face of the sometimes more profitable opportunities generated by variable income, a good investment strategy should consider allocating a portion of investments to low-risk assets.

However, investing in savings today is no longer considered an attractive investment, as it has achieved returns lower than inflation.

By investing resources in Tesouro Selic, you have the power to diversify and protect your investments.

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