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Do you know what variable income is? Understand how it works in the Brazilian market

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Variable income assets are those for which we do not know in advance the income we will obtain in the future and the value to be redeemed may be greater, equal or less than what was invested . For this reason, they are not recommended assets for people who cannot or do not have the tolerance to take risks. In this article we will learn more about variable income and the main types of financial assets in this category.

What is variable income?

Before we know what variable income is, it is good to know what a financial asset is.

A financial asset is an instrument intended for people who wish to direct their resources towards investments. Companies looking for resources to expand their business go to the capital market to issue shares – which are variable income financial assets –, or debt securities, such as debentures, which are fixed income assets .

The following are considered variable income investments:

  • Actions;

  • Real estate funds;

  • Exchange;

  • Gold;

  • Derivatives.

Foreign exchange assets, gold and especially derivatives are aimed at professional and highly aggressive investors . The investor (individual) can even invest in gold and foreign exchange via investment funds, but this is the subject of another article. In derivatives, the great risk lies in the fact that they allow investors to leverage their positions, which also exponentially increases the investment risk.

See too: instrumentos de inversion de renta variable (variable income investment instruments)

Therefore, let’s stick to investing in shares:

Stock investment

Shares are the most prominent variable income products and, possibly, the best known to investors in the financial market. Shares are securities that represent a portion of the share capital of a corporation and that grant the owner the right to participate in the company’s results.

Since the share is a proportional part of the share capital, we become owners of a portion of the company corresponding to the number of shares we own.

Despite price fluctuations in the short term, it is necessary to keep in mind that a share is a real asset that gives the right to participate in the company’s future profitability. Sooner or later, the price of a share ends up converging with the evolution of profits.

As the return is not previously defined, it ends up becoming potentially high, when a company issues shares it does not assume obligations to third parties and all shareholder profitability depends on the company’s financial results.

The shares of Lojas Renner, for example, after falling during the 2008 crisis, began an upward trend that continues to this day.

Those who invested in Petrobras shares ten years ago made gains until 2008, after which the share entered a downward trend that, only in 2016, began to show signs of recovery.

What should we take into account in these two cases? The behavior of financial results (profit!) and the behavior of action . As we know, Petrobrás has been suffering constant problems and losses for years, and as a result, the value of its shares is only falling.

Renner stores, on the contrary, have been making higher profits each period, in the wake of the expansion of consumption, and their shares show an increasing behavior.

How to invest in variable income?

As we have seen, investment in variable income is made with the expectation of gains resulting from the income from the shares acquired and their appreciation higher than fixed income . Those who buy shares, even unconsciously, speculate on the possibility of future income, market behavior and the possibility of stock appreciation.

When investing in variable income, investors generally choose to use one or two streams of analysis: fundamental and technical. In reality, the methods defended by these schools of thought are complementary and it is difficult to use one of the two methods in isolation.

It is normal to use these techniques simultaneously, where fundamental analysis is suitable for selecting those shares that should be purchased, while technical analysis serves to determine the moment at which they should be purchased.

The combination of these methods makes it possible to maximize the possibilities of gains and minimize losses in a stock portfolio. Thus, investment in the stock market arises from the expectation of gains from the income from the shares acquired and their appreciation in the market.

Concluding

When investing in variable income , people aim for a higher return than that obtained in fixed income. However, you need to be aware of the risks of investing in this type of asset. Before thinking about investing in shares, the person must have, at least, a good security reserve that is capable of covering possible needs in the short and medium term. Any investment in variable income must be made with a long-term view and in a way that does not affect your financial and physical health.

 



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