Types of Investments: 10 primary financial uses in fixed and variable income.

With numerous investment options to choose from, it can be challenging to determine the most secure and effective way to invest your money. However, there is no need to lose hope!

It is possible to learn how to invest wisely without reading multiple books on the financial market or obtaining an economics degree.

We will outline the fundamentals of top investment options in this article to help you maximize your financial opportunities and make your money work for you effectively.

Understanding the different kinds of investments is important.

It is crucial to be aware of the various investment choices available in order to grasp all the potential ways to generate income as an investor. Each type of investment comes with its own set of pros and cons, and factors such as risk tolerance, market knowledge, investment timeline, and goals will impact the most suitable investment options.

There are various investment options available, and we will discuss them all to help you choose the most suitable one for you.

High returns and low risk do not typically coexist in investment products as risk and return tend to be directly related – higher returns usually come with higher risks, and vice versa.

We will start by categorizing investments into two main types: fixed income and variable income.

Types of investment: the primary uses in fixed and variable income

Investing in different asset types can be beneficial and yield satisfactory returns, but it is crucial to align your investments with your objectives to attain this satisfaction.

Many new investors may feel uncertain when they begin investing, but by learning key investment principles and terminology, they can gain a clearer grasp of how to manage their money effectively.

We have categorized the main types of fixed income and variable income investments in the table above to assist you on your journey. Later, we will provide detailed explanations for each of these financial options.

Fixed Income Investment Options

Fixed income investments are investments where the remuneration value is known in advance or can be calculated. The remuneration can be predetermined or linked to indexes like the SELIC rate, CDI, or CDB.

Fixed-income investments are typically favored by conservative investors due to their low level of risk. There are various options available for investing in fixed income.

Chain Savings

The person’s wish for independence and financial security may prompt them to opt for investing in a savings account, which is the most conventional form of investment in Brazil.

The investor may be confident in the monthly returns, but this does not guarantee it is the most profitable investment choice compared to other options available.

Titles from the public or Treasury directly

Public bonds, which can be bought by the Federal Government, represent State debts where investors lend money to the country. This type of investment is considered low risk, as the likelihood of the government failing to repay the debt is very slim, especially in countries like Brazil with high public debt liquidity.

The returns for short and medium-term investments will vary based on the duration of the investment. Interest can be withdrawn every semester, and there’s also an option to sell the investment and withdraw the funds before the contract period ends.

Profitability is limited to the contracted rate, such as inflation, resulting in low returns. When indexed in the SELIC rate, these securities are referred to as the Financial Letters of the Treasury.

Certificates of Deposit issued by banks (CDB)

Bank Deposit Certificates are used by banks to gather funds, allowing them to lend money to other clients at a higher interest rate, benefiting both the investor and the financial institution.

They operate similarly to Public Titles and can be attached to either the CDI or the TR. Investors can also withdraw the funds before the specified deadline, if the contract allows for it.

CDBs offer more than just a savings option, but they are subject to IOF charges within the first 30 days, along with Income Tax.

It is important to be cautious when selecting a bank, as a less established institution may fail during the investment period, resulting in the loss of all funds. It is advisable to invest up to the 250 thousand reais limit protected by the Credit Guarantee Fund (FGC).

Real Estate Credit Letters (LCI) and Agribusiness (LCA)

LCI and LCA, like CDBs, are credit instruments offered by banks where investors lend money to the bank and receive it back with interest after a set period. The key difference lies in the third party involved: real estate for LCI and agriculture for LCA.

Credit letters offer greater returns compared to savings accounts and do not incur income tax, unlike CDB. However, early withdrawal is not allowed before the maturity date.

Bonds

Debentures, although the name may seem unfamiliar, are essentially securities issued by corporations. Typically, those who invest in this type of asset have a moderate risk profile.

Debentures operate similarly to a CDB or LCI, where instead of lending money to a bank, investors lend money to a company. Investors have the option to hold onto the debenture until it matures, sell it to another party, or even convert it into shares.

These investments aim to secure funds for undisclosed organizations over the medium to long term, posing a high-risk scenario where the issuing company may default on the agreed payments.

Variable income is one of the different types of investments available.

Variable income investments in the financial application market differ from fixed income investments, as the return cannot be predetermined or calculated due to its dependence on fluctuating market factors.

Variable-income investments, despite their high risk, attract interest due to their potential for higher financial gains compared to other investment types, with various application guidelines to consider.

Exchange and gold trading

Older forms of variable income investments include stocks and gold. Stocks are often influenced by the value of the US dollar, but there are also opportunities to invest in different currencies.

The price of gold grass fluctuates based on factors such as changes in the value of the dollar, the European crisis, stock market trends, and interest rate decreases.

The high risk associated with these forms of investment is influenced by the global economic instability, making exchange and gold less secure options.

Deeds

This type of investment is widely recognized by most people, and has even been popularized through memorable movie scenes set in the Stock Exchange.

The actions represent the smallest parts of a company that can be bought. Buying them makes the purchaser a “company business partner”, with the purchased amount determining their share.

Different types of trading methods depend on how long the action is held, such as Day Trade, where shares are bought and sold on the same day, or Swing Trade, where shares are held for a few days, usually 3 to 6 days.

Fundamentalism involves assessing data from companies, analyzing the macroeconomic environment, and considering the industry’s status to determine the most suitable investment options.

The various factors are considered when brokers trade shares based on market supply and demand, with returns typically realized over the long term.

Some stocks also provide dividends, which are periodic payments of a corporation’s profits to shareholders. Interested in learning more about dividends and their functioning? Discover more information here.

Buying and selling properties

Investing in real estate presents a promising chance for future financial gains, rooted in the longstanding practice of property ownership and valuation across generations.

Property ownership necessitates ongoing upkeep to prevent the devaluation of the property, despite providing a level of stability.

A high initial investment capital is required, limiting who can opt for this type of financial investment. Renting out a property is another method to boost profits, but it also involves the initial requirement of property acquisition.

Investment Funds

Investment funds consist of a collection of financial assets and are created by administrators to attract investments from buyers through the issuance of shares, which represent the smallest portions of the fund.

The value is typically reduced as it is shared among all investors, with each quota costing the same due to the total sum of all quotas.

There are different types of funds available for investment, each with varying profitability factors similar to other investment options.

There are different types of funds such as Actions, Cambials, Short Term, International, and Multimarket that are linked to various indexes.

The main characteristic is its size: as it is a shared application, the values are divided into shares, making it more affordable for each individual.

Those interested in investing for retirement typically concentrate on Private Pension Plans, which are essentially long-term investment funds commonly chosen for their conservative nature. They are often utilized to supplement income received from the retirement system (INSS) when invested in fixed income.

Real estate investment funds (FII) and crowdfunding for real estate.

We will explore this type of investment funds further as it offers a more appealing option compared to the traditional buying and selling of real estate.

Investors can purchase shares from an Investment Fund to become part owners of a company, like a commercial building, with the goal of earning rental income. This is similar to investing in a real estate fund, where you acquire a stake in a property, even if it’s a small one.

There is a newer version of FII called real estate crowdfunding, which offers significant advantages for investors compared to the traditional method.

What type of investment is considered the most advantageous in the end?

It all comes down to your investor profile when deciding what investment option is best for you. Identifying your profile is crucial in determining the most suitable choice, which goes beyond the typical risk levels. It is important to consider your personal and financial goals before deciding on short, medium, or long-term investments.

An individual with patience or availability for waiting may opt for an investment where the payment is only due at the end of the contract period, such as fixed-income investments.

Another type of daring investor may choose to keep the option of open redemption, not restricted by the agreement, in order to seek the highest return rate available in the market at that moment, prioritizing maximum profitability. Variable income investments are more suitable in such cases.

What are the most secure forms of investments?

Investing involves accepting varying levels of risk, with higher risk potentially leading to greater rewards, and lower risk resulting in lower potential rewards. Different types of investments carry different levels of risk.

To avoid high risks and instability with certain apps, it’s essential to understand your investment goals and choose a secure option that aligns with them before deciding.

Investments should be viewed as instruments to assist in reaching your goals, rather than complex barriers. Beginning to invest is an option for anyone, at any time, without requiring significant capital or previous experience in smaller investments.

In conclusion

You should diversify your investments to lower the non-systematic risk. When choosing where to invest your money, consider the suitable asset allocation based on your investor profile, risk tolerance, and investment horizon.

To build a secure financial future, it is essential to diversify investments by combining fixed and variable income options with consideration of risk, taxation, and time horizon for long-term goals.