Let's deal here with the most basic and initial. Generally, from this baseline, investors will progressively refine their investments with other differentiated assets.
For the long-term investor who is indifferent to receiving periodic income
Two basic assets to start investing in are
(i) equities, through the S&P 500 index fund, which efficiently invests in the top 500 US-traded companies, and
(ii) fixed income through an index fund that buys US Treasury bonds with maturities of up to 3 months.
Examples of two popular funds that fulfill the above role are IVV (iShares Core S&P 500 ETF) and SGOV (iShares Core US Aggregate Bond ETF). These two assets respectively represent an investment in the largest US companies and short-term fixed-income securities issued by the US government.
A portfolio will typically start from these two components, with the proportion depending on the level of risk tolerated by the investor.
Important: Clients who do not tolerate temporary negative variations in investments should not invest in IVV, as this investment, from time to time, presents relevant negative variations that can reach more than 20% negative in periods of market recession.
For investors who prefer only fixed income, with a focus on passive income
In this case, the two underlying assets are short-term US Treasury bills and FDIC-backed (i.e., US government-backed) US bank certificates of deposit.
In addition to these two basic assets, the investor can add other investments that, although they carry some risk, increase the potential return and income of the portfolio. This aspect is important for customers who want interest rates higher than the US base rate.
One type of asset popular among wealthy Brazilians is bonds issued abroad by Brazilian companies. These bonds are popularly known as “Brazilian bonds”.
Brazilian bonds are issued by large Brazilian companies and pay high-interest rates by international standards. These bonds generally pay quarterly or semi-annual yields, have different maturities, and their market value varies daily according to purchase and sale negotiations in the market.
If an investor buys one of these “bonds” and holds it until maturity, the investor will receive the amount invested plus the return promised at the beginning of the investment. If the investor needs to sell/redeem the investment before maturity, in this case, the redemption value will be that at the time of early redemption (which may be equal, lower, or even higher).
Finally, for those looking for even higher returns, a specific class of bond investments is perpetual bonds. These bonds are particularly interesting because they pay higher passive interest. On the other hand, they do not have a short-term maturity, which makes them suitable only for that portion of investments that investors will not need to withdraw in the short term. Perpetuals are good for saving for the long term and accumulating earnings.
