Savings of a lifetime: BRL 600,000 in large bank LCI. I’m 73 years old. What change do you suggest? – 07/04/2023 – From Grain to Grain

Questions like the one I received today from HN are frequent. For most readers, the answer seems to be simple: keep it low risk as is. However, HN could be missing out on opportunities if it does. I describe some of these opportunities and necessary questions.

Undoubtedly, an application in a large bank LCI, due to its stability and security, brings comfort. Especially if the investor has a conservative profile. But, are you just looking for convenience or do you have other goals?

It is interesting to see that HN is in the example I mentioned yesterday of investors who invest 100% in private credit from large banks. In this case, it applies values ​​higher than the FGC, but considering the fact that it is in one of the five largest banks, the risk is low.

However, the above information is not enough to suggest changes, or even maintenance of your application.

First, the fact of investing in tax-exempt securities such as LCI or LCA does not mean that you are making a good investment. First of all, it is important to know the contracted rate of return and the index, that is, if it is referenced to the CDI, IPCA or prefixed.

For example, if the contracted return is less than 90% of the CDI, the investor is not getting a good deal.

It is possible to invest in securities like this with yields of at least 96% of the CDI. Even if this were the contracted yield, further information would still be needed.

Before selecting your investments, it is important to detail two factors: the objectives and constraints you have.

For example, HN could have more than enough income to cover his current expenses and this equity could perhaps be destined only for the succession.

In this case, the appropriate instrument for succession would not be an LCI, but, for example, a private pension plan of the VGBL type. Also, it would be very important to choose this VGBL well.

Another possible situation would be that HN did not have any income and his financial assets were only intended for his monthly retirement income.

Also, in this situation, investing only in LCI and LCA may not be adequate. Interest rates are expected to drop from this year onwards. Therefore, it would be appropriate for HN to take advantage of these higher rates to lock in a higher rate of return, guaranteeing his income for the rest of his life.

For example, consider the real rate, that is, above the IPCA, of 6% per year, existing today in federal public bonds. Investing BRL 600,000 in equity in this title would be enough to provide an income equivalent to BRL 4,000 per month, adjusted by the IPCA and guaranteed up to the reader’s 95th birthday.

Investing in LCI alone would not be able to guarantee this income until she is 95 years old.

Depending on the HN investor profile, this value could still be diversified into alternatives such as private credits without FGC and other assets, thus seeking even higher returns in the long term, as mentioned in yesterday’s article.

Thus, before deciding what to do with your investments, reflect on what you want your investments to provide and what restrictions you impose on them, such as liquidity and risk. In this way, you can search for investments that fit within the defined planning.

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

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