I explain how you can reach BRL 1 million, investing only in CDBs – 08/25/2023 – From Grão to Grão

Some feats seem completely improbable when we only look at the end result. This happens a lot in sports, but also in investments. Reaching BRL 1 million in financial assets seems very distant and unlikely. However, this goal may be closer than you think. However, to achieve it, two factors will be necessary.

In addition to overcoming your disbelief, two elements separate you from achieving this goal: discipline and patience.

I chose to explain how to reach R$ 1 million using only CDBs, because it is a simple, safe financial instrument, as it is guaranteed by the FGC and within reach of the majority. Currently, there is a wide offer of CDBs on investment distribution platforms online.

However, it cannot be just any CBD. If you want to stay put and not do a bit of research, you’ll be left behind.

However, not much research effort is required. The biggest sacrifice is to let go of the traditional investment in the big bank. CDBs from large banks do not remunerate enough.

I will present two ways for you to pursue these goals, but the second alternative is the one I most recommend.

The first way is more natural for investors, but you will have to save more each month. You will only invest in CDBs with a return of 115% of the CDI or higher. This goal is possible, as there are several CDBs of medium-sized banks with returns higher than this one. And with an equity of less than R$ 1 million, it will always be possible to be within the FGC guarantee limit.

Anyone who has done this over the last 20 years and saved just R$1,211.00 per month now has R$1 million. For those who earn more than BRL 6,000 a month, this goal should be reasonable, as it means saving 20% ​​of what you earn. Learn to cut your costs and you will see that it is possible.

It will hurt at first like any exercise program. But over time, discipline becomes a habit and the prospect of reaching the goal leads to motivation.

The second alternative is to invest in IPCA-linked CDBs that pay an interest rate 1.5% above the five-year government bond.

For example, a government bond indexed to the IPCA with a five-year term currently yields IPCA+5% per annum. Therefore, you will select CDBs with a return of at least IPCA+6.5% per year, which is 1.5% higher than the 5% real interest rate. Today there are CDBs with returns of up to IPCA+7% per year. So this is also a very simple goal.

Those who followed this goal over the last 20 years only needed to invest R$ 880.00 per month in CDBs with this return.

Obviously this is not an accurate account. It is a fact that future rates will be different from those that occurred in recent decades.

We don’t know how rates should behave in the future, but I am convinced that if you save at least R$ 1 thousand per month in CDBs referenced to the IPCA with a return of 1.5% above the five-year public bond, you will get there in a term close to 20 years.

The most difficult part of this goal is not finding the CDB, as there is a wide range of offers guaranteed by the FGC.

The greatest effort is to maintain savings discipline, even when consumer temptations appear, and to have the patience to wait for the necessary period.

Perhaps the most appropriate target for your case is not BRL 1 million. But, if the effort you manage to make in savings is half that, aim for R$500,000. To reach R$ 2 million over the last 20 years, investors needed to invest twice as much monthly.

No matter what your goal is, make a plan to achieve it and have the discipline and patience to follow through with it.

Michael Viriato is an investment advisor and founding partner of Investor House.

Talk directly to me via email.

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