Category: Sem categoria

Derivatives are financial instruments whose value derives from other assets, reference rates, or market indices. They can be derived from physical assets, such as soybeans, corn, and oil, as well as from financial assets like currencies, stocks, or interest rates. The main types of derivatives are: forward contracts, futures contracts, options, and swaps.

What Is the Trading Dynamics?

The trading dynamics of derivatives is relatively straightforward: the parties involved commit to buying or selling a specific asset for a predetermined price within an established timeframe. This transaction involves a prior agreement on the object, price, and deadline, which are known in advance by both parties. However, what generates uncertainty and risk is the fact that the future price of the underlying asset for the derivative is always unknown.

Although the trading itself is relatively simple, the strategies for operations with these instruments can be extremely complex.

What Is the Utility of Derivatives?

Each type of derivative has its own characteristics and trading rules; however, they all practically serve three purposes: hedging, speculation, and arbitrage, as detailed below:

Hedging

Derivatives are especially useful for locking in asset prices in the future, acting as a sort of insurance that reduces the impacts of price volatility in the markets. This function allows companies to better predict and plan their cash flows, as they have prior knowledge of expenses and costs. This use, known as hedge, is particularly relevant for companies with debts in foreign currency, such as dollars or euros, or that require these currencies to import inputs. Furthermore, derivatives are extremely important for businesses in agriculture, mining, and manufacturing that directly depend on commodities.

Speculation

On the other side of hedging operations, we usually find speculators. These agents profit from the variations between the agreed prices in contracts and the actual prices of commodities, which can result in gains or losses for the sellers and buyers of derivatives.

For the speculator, the underlying asset of the derivative is not of utmost importance; they are more interested in the risks involved in the operations and the potential to make profits.

Although some people have a negative view of speculators, they play a crucial role in the financial market. By acting as counterparts for those seeking price protection, speculators are essential for the market’s functioning, assuming risks and generating liquidity.

It is important to mention that studies suggest that day trading generally results in losses for individual investors, and these losses can be amplified in cases of leveraged operations that use derivative instruments.

Arbitrage

Some investors use derivative instruments to perform arbitrage operations, which are considered lower risk compared to speculation. This is because, in arbitrage, the buying and selling prices are already known in advance.

In simple terms, arbitrage consists of taking advantage of different prices for the same asset in various markets. Although the intrinsic value of the asset is the same regardless of the market, the price formation process is not perfect, which can lead to price discrepancies. This is where arbitrage comes in, seeking to equalize prices and generate profits, typically small in each operation.

In times of high-frequency trading, home brokers, and ultra-fast data transmission, arbitrage opportunities are fewer, and the price formation process tends to be more efficient. However, historically, derivatives used in arbitrage have been very useful for investors who made profits and for markets that became more efficient.

With Great Power Comes Great Responsibility

There are various controversies surrounding derivatives, but it is undeniable that these instruments play a useful and crucial role in modern capitalist economies. However, it is essential to consider the magnitude of operations involving these assets and the possibility of generating systemic risks. Therefore, I believe that such operations should be conducted with caution and based on in-depth studies. I agree with the words of the Oracle of Omaha:

“Derivatives are financial weapons of mass destruction.”

— Warren Buffett

How to Invest in the Derivatives Market?

To invest in derivatives, it is necessary to follow some steps, including:

1. Know your investor profile
2. Choose a brokerage to operate
3. Analyze the derivatives and choose a strategy

If you are interested in investing in this market, consider seeking the assistance of an investment consultant. For more information on how to invest in the four types of instruments mentioned, contact me to schedule a consultation.

Investments are classified into two main categories: fixed income and variable income. The main difference between them is that, in fixed income, the amount to be received in the future is known in the present, while in variable income, it is not possible to predict the amount with certainty. There are various asset classes that belong to one of the two groups. Additionally, there are investment vehicles that can be formed by fixed income assets but are considered variable income investments.

Some examples of fixed income investments are Pre-Defined Public Debt Securities, such as certain Treasury bonds, Real Estate Receivables Certificates or Agribusiness Receivables Certificates, with pre-defined rates, debentures, and others. In variable income, stocks and real estate investment funds are good examples. Investment funds and ETFs (Exchange Traded Funds—typically stock funds that replicate indices and are traded on stock exchanges) also usually have variable returns. There is also another investment option that can combine fixed and variable income assets, such as structured operations. These operations can be structured by the investors themselves, but it is common for brokerage firms to offer pre-structured operations for their clients, known as COEs (Certificates of Structured Operations).

In Brazil, there are several investment options. However, when comparing our country to more developed nations and markets, such as the financial and capital markets of the United States, we realize that the options here are still relatively limited. In recent years, financial education has reached more people, but there is still much room for growth in this area. Some people have preferences for fixed income investments and assets, while others prefer variable income; these preferences depend on various factors, such as the investor’s profile, risk tolerance, investment horizon, among others.

It is important to highlight that many people, when investing, do not consider some of the characteristics of investments and may also not be very aware of the risks they are taking when investing in certain assets or engaging in certain operations. This lack of awareness can lead to losses and, consequently, dissatisfaction. Therefore, it is important to seek to better understand the markets, the assets, and even the interests of the participants. The market is full of people promising returns, strategies, information, and, in my opinion, even miracles. In the case of financial pyramids, for example, people are persuaded to participate in the system and, in most cases, end up losing money, as the base of the pyramid, at the moment of collapse, is always very broad.

Regardless of your preferences regarding asset classes, it is always good to count on the assistance of a professional. As the legendary investor known as the Oracle of Omaha said:

“Risk comes from not knowing what you’re doing.”

— Warren Buffett

If you want to start investing or need help with your investment portfolio, you can count on the assistance of an Investment Consultant accredited by the Securities and Exchange Commission; contact me to schedule an initial consultation.

There are several factors that justify the act of saving. If you believe that life is short and that it’s not worth putting some money aside to spend in the future, you might need to rethink that perspective.

The Securities and Exchange Commission of Brazil defines saving as accumulating funds in the present to use them in the future, which generally involves changes in habits and requires a reduction in personal and family spending.

Saving allows you to achieve financial security, one of the main factors of happiness, as it provides a more relaxed relationship with the future. Imagine, for example, knowing that if you were to be unemployed for a year, you have enough savings to sustain yourself during that period. This is why saving in the form of a financial reserve or emergency fund is extremely useful. Reaching a savings level high enough to support yourself for a year is not easy, but it is possible. With a saving rate of 10% of your income, you can accumulate a year’s worth of savings in 10 years.

Saving is also a very important habit for those who want to invest. According to the Securities and Exchange Commission, investing is employing saved money in applications that yield interest or other forms of remuneration or correction. In other words, when you invest your money, after a certain period of time, you will have more money than you had before. It’s a virtuous cycle: the more you save, the more you can invest, and the less you need to save to achieve financial security.

If you start saving today, in the future you can look back and be grateful to your “current self” for having begun to save and invest. Whether you’re facing difficult times or reaping the rewards of investments, you are ultimately responsible for it all.

Knowing how to invest is just as important as saving, as an investment can greatly increase your saved wealth or even destroy it completely. Therefore, in other articles, I will explain in detail the types of investments, types of risk, and investor profiles. If you know your investor profile and understand the types of investments and their risks, you will certainly be able to choose the most suitable options and grow your wealth.

For many people, the world of investments is considered boring and highly complex, which can be quite discouraging. Additionally, mistakes in this field can be very costly. However, you don’t need to spend a lot of time or understand complex and tedious assets and instruments. You can rely on the assistance of a qualified professional who finds the financial market interesting and has made it their profession to help people invest better.

If you want to start your investments or if you’re already an investor looking to improve your returns or reduce risks, you can count on me to assist you, in exchange for a fair and transparent fee. With securities consulting, there are no conflicts of interest, and you can rely on professional service to align your assets with your profile, objectives, and time horizons. Contact me to schedule a consultation.

Shares are securities—also known as stocks—that represent the smallest fraction of a company’s share capital—or equity—and are the result of dividing the share capital into equal parts. Shares can be from both publicly traded companies and privately held corporations. However, in the context of financial markets, the term “shares” is typically used to refer to fractions of publicly traded companies, meaning those that are traded on a stock exchange.

Shares are investments in equity, granting its holders—the shareholders—the rights and obligations of a “partner” in the company, limited to the shares owned and as established by law, the acquisition of shares grants the shareholder rights such as: voting in meetings—depending on the type of share or certain conditions specified by law—dividends, interest on equity (in Brazil), bonuses, and subscription rights. These returns—which can increase the capital or the number of shares held by a shareholder—are forms of remuneration that shareholders expect in return for the invested capital and the assumption of risk.

Just as with the concept of Legal Entity (PJ) based on the Principle of Entity and the idea of limited liability, the losses that shareholders may incur when investing in shares are generally limited to the amount paid for them (similar to the invested share capital in the case of privately held companies). Additionally, shares are typically quite liquid assets: easy to trade and convert into cash. These characteristics have contributed to making shares one of the main types of assets for savings and investment, as well as extremely important tools for the economic development of nations—especially modern capitalist economies—since their inception in Amsterdam to finance the major voyages of the Dutch East India Company.

There are different types of shares, such as Ordinary (ON) and Preferred (PN), as well as different listing segments, which confer different rights to shareholders, despite the common market environment of the stock exchange. In addition to the specific rules for each type of security and each listing segment, the companies whose shares represent the share capital are also exposed to different markets and risks and have a distinct group of executives and management that can yield better or worse results for the investor.

Professional stock analysis is the prerogative of Securities Analysts; however, their analyses and recommendations are general in nature. Analysts may, for example, indicate whether they believe a stock is cheap or expensive, which would suggest whether people should invest in that company or not. However, even if a stock is cheap, the company may be unsuitable for the investor’s risk profile or may not align with their objectives or time horizon, which could lead to losses in the future.

The consultant undoubtedly relies heavily on the work of analysts, but that work alone is not sufficient for making resource allocation decisions. A more holistic, detailed, and comprehensive analysis for each investor is necessary. This in-depth analysis allows for personalized and more accurate decisions. In any case, securities consulting is a private activity of the Securities Consultant under the law.

To better manage external risks—such as macroeconomic factors—and internal company risks—such as corporate governance and culture, for example—when investing in shares, it is important to seek the assistance of a specialized and independent investment professional, such as a Securities Consultant. Contact me to schedule a consultation.

Firstly, I must say that this text was inspired by a great documentary released in 2016 and directed by Matt D’Avella: Minimalism: A Documentary About the Important Things. The documentary is just over one hour long and presents its ideas in simple language with a pleasant soundtrack. However, it leads us to reflect on our own consumption; we might even question whether, when buying something, we are consuming or being consumed. Another inspiration for this article was an interview with José Mujica (former president of Uruguay) in the documentary HUMAN, also released in 2016. In it, Pepe Mujica talks about sobriety and consumerism.

In the article “The Pleasure of Detachment: Minimalists Argue That Having Fewer Things Creates More Freedom,” by Laís Modelli, available on the BBC website, the author explains the term.

The word “minimalism” originated from 20th-century artistic movements that followed the precept of using few visual elements and gradually shifted into the social realm.

“As a behavioral expression of society, minimalism is a reflection of previous countercultural movements, such as punk and hippie, which questioned consumer society and its excesses,” explains Marcelo Vinagre Mocarzel, a researcher in culture and communication and a professor at the Federal Fluminense University.

Unlike counterculturalists, minimalists do not seek to build an alternative society. “Minimalists have sought to combat consumerism from within the system. This means they work, dress normally, and even consume.”

“In some ways, minimalists are closer to the classic capitalists described by Max Weber: capitalism itself is not the problem for them, but rather this wild capitalism anchored in ostentation and waste,” he points out.

With the meaning of the word clarified, we can continue. Many parts of our lives are lived automatically; we spend all our time searching and never truly satisfy ourselves. Many people feel empty and try to fill that void with things, either consuming or being consumed.

While we live in the best living standards in history, there is an insatiable quest for more. This desire may be natural, but today, it is no longer as necessary; we no longer live in the wild. We are programmed to live in one environment but exist in a very different one.

American culture also blinds us in a certain way, with an illusion of how our lives should be: perfect and unrealistic. Although we have our own culture, which is quite different from American culture, much of our mass culture in Brazil is imported from the U.S.; movies, series, music, and books consumed in Brazil are, for the most part, American. This can lead to a lot of dissatisfaction: besides not having the same purchasing power as American citizens, trying to live that way can cause serious harm, and most of us do not see an alternative to life other than the one we are constantly and endlessly encouraged to live. People need to know they have a choice, that they do not have to live this way.

Minimalism is an alternative, a way to escape the madness, the excesses, everything that does not add value. Living more deliberately with less is a noble goal. We live in a world where we are treated as commodities. We exist to be consumed.

The large houses many have today, and that those who don’t have dream of owning, are not fully utilized; only a small part of the space is used, something around 40%. The same goes for wardrobes full of clothes that rarely see the light of the day. From a radical standpoint, the mere fact of having bigger houses than we need already generates several problems, besides the private costs of depreciation and the opportunity cost of spending on something unnecessary that does not add value to our lives; there is also the enormous cost that is socialized, the logistical cost of people living further from their workplaces, creating ever-increasing demands for cars, energy inefficiencies, time consumption, all because of the tragedy of the commons: everyone wanting a large house. If we used only the necessary space, for example, and managed to reduce distances by 25%, we would have 25% fewer fuel losses, travel time, energy in transmission lines, and high voltage as well as in sanitation networks. Imagine if this generated a 10% reduction in your bills; besides being sustainable, it would be a tremendous saving, a huge gain in efficiency that would not diminish your quality of life or the profits of energy and sanitation companies. To benefit certain sectors of the economy, we are encouraged to consume much more than necessary, and this makes life worse for the portion of the population that does not own shares or stakes in companies and needs to work to earn income.

Sometimes, it’s good to think before consuming, so we can reduce our own expenses and also the negative externalities we generate. Consuming is also a political act. And consuming with awareness and common sense is always voting for the best candidate. All power emanates from the people, who often exercise it by handing it over to someone who harms society as a whole.

We are not always going to make optimal decisions, but we can make much better decisions than we currently do. It’s not easy to read this, but we are irresponsible. Very irresponsible. Furthermore, according to Forrest Gump, an idiot is someone who does idiotic things, and by that definition, we could consider ourselves idiots. The advantage of seeing ourselves this way is realizing that we can become better with a simple change in behavior, by reducing the number of idiotic things we do.

In economics, monotonicity implies that more is preferable to less. This may not seem very rational, but buying less than more, from a minimalist perspective, makes sense. Having more of any good is not always better, as it may generate unnecessary costs. A cost that does not satisfy a need is a trade-off that doesn’t make sense. If I buy better-quality products with greater durability, I can buy fewer products. And since the value is higher, the price is too, so corporations could continue to profit, employees could keep their jobs, and customers could keep their products (in smaller quantities but of higher quality). Some companies already do this: they sell highly durable, high-performance products and are very successful with this business model.

With an economy increasingly reliant on services, encouraging the repair of goods instead of discarding and replacing them with new products could also maintain a source of revenue for companies. We need to change our demands and thus encourage firms to change their supply.

Economics, in simple terms, is the science of allocating scarce resources. We can make much more efficient allocations and dedicate more resources to research and development; we just need to make better decisions.

With minimalism, we can achieve more progress in less time. Imagine turning 10% of expenditures on superfluous products into research and development in areas like health, energy, education, artificial intelligence, and others. We could build a much better world than the current one; we could eradicate poverty and hunger on Earth or even conquer other celestial bodies, all by simply making smarter decisions and I’m not even getting into millitary expenses, which are a problem of their own.

Gustavo Cerbasi defines salary not as income, but as compensation, following the interpretation that working steals time from the worker, time that could be dedicated to personal investments, consequently hindering the increase of one’s wealth. The fruit of our labor can be much sweeter. A life full of greed is certainly a path to unhappiness and dissatisfaction, but a frugal life is not. A frugal life can be a path to a very satisfying and free life.

Imagine a life with less – less stress, less dissatisfaction, fewer debts, a life with fewer distractions. Now imagine a life with more – more time, more meaningful relationships, more growth, more contribution, and contentment. We are very materialistic, in the colloquial sense of the word, but in the real sense, we are not materialistic enough, as we discard a lot of material, treating the result of much work as garbage. We throw away human labor every day, ours and that of others. This, in itself, is not a problem, not necessarily bad, but throwing away so much human labor without any need seems unethical and very cruel.

We can conclude that perhaps we should be more conscious, less foolish, make better decisions, and not give away our freedom to anyone, because without it, we cannot have anything else.

If you are interested in living a minimalist life and want to start investing with the help of a Securities Consultant registered with the Securities and Exchange Commission, contact me and schedule a consultation.

Tesouro Direto is a program by the National Treasury of Brazil, developed in partnership with B3 – the Brazilian Stock Exchange – to sell federal government bonds to individual investors, entirely online. The program was launched in 2002 during the administration of President Fernando Henrique Cardoso, with the aim of democratizing access to government bonds, allowing investments starting from approximately R$ 30.00.

The bonds offered through the program are National Treasury bonds or Federal Public Debt (FPD) securities, and they play a significant role for both the market and the government. These bonds are fiscal balancing tools that help raise funds from society, primarily aimed at financing public expenses.

Governments frequently rely on borrowed resources to finance their activities, whether in emerging countries or more developed economies. Historically, government bonds have been crucial for funding expenses related to wars, military operations, scientific research, and infrastructure. Examples of countries with notable public debts – for various reasons – include Japan, the United States, Greece, and Argentina.

Beyond the historical importance of public debts for states, debt securities also serve as important savings and investment instruments. The government is generally considered the best borrower to lend money to, as it is almost certain that the principal amount plus interest will be repaid upon maturity. This is because the government can print more money to fulfill its debt obligations, which other borrowers cannot do. Lending to the government is seen as the safest investment available because, theoretically, the entire country would have to collapse for the debt to go unpaid, which is highly unlikely.

Governments have defaulted before, and each country carries its own specific risk and risk premium. Nevertheless, many financial institutions hold a portion of their reserves in government bonds. Additionally, in cases of severe economic crisis, taxes may be levied on properties such as real estate, or large sums of money may be printed, potentially eroding the currency’s value through inflationary tax. It is virtually impossible to eliminate the risk of public debt; one can only minimize exposure to it: strategies such as investing in other countries can reduce this risk, but then the investor is exposed to the risks associated with the economy and public debt of the other country.

In the context of globalized economies, the significant integration between national economies creates systemic or non-diversifiable risks. Commercial interactions between nations, companies, and individuals affect reserves and financial flows. Brazil, for example, is one of the countries that heavily finances the U.S. public debt. At first glance, it may seem illogical for Brazil, which borrows money, to lend to the U.S. Treasury, especially when considering that interest rates paid by the Brazilian government are usually higher than those paid by the U.S. government, effectively causing a loss for Brazil’s treasury. However, these reserves are very useful in avoiding international market volatility, generating confidence for agents who depend on currency conversion for trade.

The international reserves managed by Brazil’s Central Bank act as a kind of “insurance” that guarantees the fulfillment of foreign obligations. The reserves are usually held in U.S. dollars, as it is the most widely used currency for international trade, and U.S. Treasury bonds, backed by the U.S. government, are considered some of the safest in the world, partly due to the size and strength of the American economy.

Returning to Tesouro Direto, its features of security, accessibility, and flexibility have made it a very successful program. It is an excellent investment alternative, offering bonds with different types of returns (fixed-rate, linked to inflation variations, or linked to the basic interest rate of the economy), various maturities, and different payment schedules. This wide range of options makes it easier to find bonds that align with each investor’s goals.

The bonds may be fixed-rate or linked to the Selic rate – the economy’s basic interest rate – or the IPCA rate – Brazil’s official inflation rate – and have different maturities, allowing for relatively short-term or long-term investments. Some bonds pay semiannual interest, meaning there is no need to wait for the bond’s maturity or sell it before the maturity date to start enjoying the benefits of the investment.

In addition to the bonds mentioned above, there are currently two very specific types of bonds: Tesouro Renda+ and Tesouro Educa+. Tesouro Renda+ is a bond that pays monthly income starting from the conversion date, which occurs 240 months before maturity. This means the bond can serve as a retirement supplement, helping investors retire with quality. Tesouro Educa+ is also a bond that pays monthly income from the conversion date, which occurs 60 months before maturity. This bond aims to help families invest in their children’s educational future, functioning as a form of savings. Both bonds have a hybrid return, with one part fixed and the other linked to inflation.

To better manage the risks of Federal Public Debt and choose the most suitable bonds and maturities for your goals, considering macroeconomic conditions, the need for resources, and other characteristics of your financial planning, it is important to seek the assistance of a specialized and independent investment professional, such as a Securities Consultant. Contact me and schedule a consultation.

A few days ago, a consulting client asked me about the difference between two Treasury Direct bonds: the 2035 Fixed-Rate Treasury Bond with Semiannual Interest and the 2040 IPCA+ Treasury Bond with Semiannual Interest. An obvious difference is the nearly five-year gap between the maturity dates of these bonds. Additionally, I’ll disregard the interest rate values paid in each case. Both pay semiannual interest. For educational purposes, I will focus on the fact that one is fixed-rate and the other is linked to the IPCA.

The IPCA is the Broad Consumer Price Index, measured by IBGE (Brazilian Institute of Geography and Statistics), which is the official inflation indicator of the country.

The first bond, which is fixed-rate, has a defined rate, providing a guaranteed nominal return. The second bond has a guaranteed nominal portion and also pays the variation in inflation. In other words, for the second case, the investor is assured that their money will be adjusted in real terms.

For analytical purposes, let’s use a very simplified example:

Suppose the IPCA is at 5%, and the interest rate of the IPCA+ Treasury Bond is also 5% for a given period. We then assume that 10% interest will be paid for the period. If the fixed-rate Treasury Bond is also paying 10%, there is virtually no difference between the two investments.

Now, suppose inflation rises to 10%, those who invest in the IPCA Treasury Bond will receive 15% return, while those who invest in the fixed-rate Treasury Bond will receive only 10%. On the other hand, suppose, for example, that inflation in the period falls to 2%, then the fixed-rate Treasury Bond investor would receive 10%, and the IPCA+ Treasury Bond investor would receive 7% as remuneration for the period.

From this analysis, we can see that while one rate is fixed, the other is hybrid, consisting of a fixed part and a variable part. This way, we also realize that these investments may be more or less suitable for each case, hence the importance of seeking assistance from a specialist. You can contact me to schedule a consultation.

Have you ever thought about how you could be using your money more efficiently? Many people struggle with personal finance and investments, and you’re not alone in this. The good news is that there’s a simple and accessible solution to help you improve your financial situation: hiring a financial advisor.

Why Hire a Financial Advisor?

1. Expertise and Knowledge: A financial advisor is a trained professional who understands and manages investments. They know the ins and outs of the financial market, the best strategies, and can help you avoid common mistakes that can be costly. Imagine having someone who knows all the available options and can choose the best one for you!
2. Personalized Planning: Everyone’s financial situation is unique. What works for one person might not be the best for another. A financial advisor will analyze your personal situation and create a plan tailored to your needs and goals. Whether you want to buy your dream home, secure your children’s education, or ensure a comfortable retirement, they can help chart the right course.
3. Time Savings: Managing your investments can be complex and time-consuming. By hiring an advisor, you delegate this responsibility to a specialist, allowing you to focus on other areas of your life without worrying about the daily management of your investments.
4. Security and Peace of Mind: With the help of a financial advisor, you can avoid impulsive decisions that could be detrimental. They’ll help you understand the risks and opportunities in the market, making you feel more secure and confident about your financial future.
5. Ongoing Monitoring: The financial market is dynamic and always changing. A good financial advisor doesn’t just help you create an initial plan but also monitors and adjusts your strategies as needed. This means you’ll have someone constantly updated on best practices and opportunities.

How to Choose the Right Advisor

When choosing a financial advisor, it’s important to check their qualifications and experience. Ensure they have a solid track record and positive references. Additionally, it’s crucial that the advisor understands your needs and works transparently, explaining all options and costs involved.

Conclusion

Investing in your financial future doesn’t have to be complicated or lonely. A financial advisor can be the partner you need to achieve your goals with confidence and efficiency. Don’t let a lack of knowledge or fear of making mistakes hold you back from seeking the best for your finances. Hiring an advisor is an important step to protect and grow your money and ensure a more secure and promising financial future.

If you want to secure a more stable and comfortable future, consider speaking with a financial advisor today. Your future self will thank you for making this decision!