With today’s interest rates, this instrument would have been the best investment in 10 years – 10/08/2023 – From Grão to Grão

Obtaining a fixed return of 16% per year is not common. In the last 10 years, no traditional application has managed to achieve this return. The technology stock index represented by the Nasdaq Stock Exchange was the best in this period and returned only the equivalent of 13.4% per year. So how can you get 15% per year or more?

After my article yesterday, I received some questions by email about which fixed income asset could obtain this 15% annual return that I mentioned.

As I mentioned, this rate of return can be obtained on private credit securities. However, it is not common at this time. It is possible to find CDBs with rates of this magnitude, but it is not easy. However, there is an application that has gained a lot of popularity at the moment and manages to provide this return.

However, the way this application was sold in the past brought some prejudice against the instrument due to a lack of understanding about it and its scope. I’m going to make an analogy closer to investors.

You’ve probably heard bad things about investment funds. There are equity, multimarket, foreign exchange, real estate and fixed income funds. In each of these categories, there are good funds and bad ones. Many investors are prejudiced against funds, as they either invested in a bad fund or in one of the risky alternatives and the result was frustrating, as the risk materialized.

The same happens with this other fixed income instrument that I am referring to, which currently has interest rates of up to more than 16% per year pre-fixed from good companies.

A fixed-rate investment with a return of 16% per year would have the capacity to double the capital invested in less than 5 years.

I am referring to the Structured Operations Certificate (COE). Just like in funds, there are COEs for shares, multimarkets, foreign exchange, fixed income and others. Also, within each of these categories, there are good products and bad ones. Therefore, if you have any prejudice, it is either because you applied it to a bad product or a risky alternative.

However, there is also the fixed income alternative in COE, whose risk is only the private credit risk as in bonds in this category. So, what makes more difference to you, the name or the return?

In the process of building an investment portfolio, the art lies in selecting good products, which are aligned with a favorable economic scenario and are more likely to provide a good result.

The current economic scenario is one of controlled inflation and falling interest rates. In this scenario, fixed income assets referenced to the IPCA are most likely to present a good balance of return per risk. Investment on the stock market can also be positive, but it also depends on conditions of risk aversion and growth. Therefore, they should present greater volatility as we have seen this year.

Therefore, when talking about a fixed interest rate higher than 15% per year, there is little risk of failure when investing in products from good quality and diversified companies.

Be careful not to create prejudices and thus miss good opportunities. The secret is to choose good products and invest in a diversified way.

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

Speak directly to me via email.

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