Swap Investment to Win From Inflation

Those who prefer to invest in savings have lost money to inflation. The rise in the Broad National Consumer Price Index (IPCA) has been responsible for eroding the corrections of Brazil’s most popular financial product, which confirms its lack of attractiveness.

In the last 24 months, the accumulated income from savings was 7.63%, while inflation rose 21.54% in the period, according to calculations by Igor Martins, partner and investment advisor at One Investimentos. Seeing inflation eroding almost three times more household savings income is something to worry about considering the entire challenging scenario we are experiencing. This means a real loss of approximately 14% in the ability to buy everything that is left in savings, says Martins.

So why are there so many people who prefer to keep their money in savings accounts? And which options are just as safe? What investments are tax-exempt? See below.

If you lose money, why are there so many investors? The specialist says that savings are still one of the most used applications in Brazil because of its practicality and, mainly, due to the lack of knowledge of better alternatives for conservative investments.

Although savings are being eroded by high prices, the asset has some points in its favor, according to Karina Valadares, financial planner at the Brazilian Association of Financial Planning (Planejar). “I like to say that worse than investing in savings is not investing.”

The specialist from One Investimentos highlights other aspects: the asset fulfills the role of correcting part of the families’ resources, serving as an emergency reserve with immediate liquidity.

In addition, Martins mentions the exemption from Income Tax (IR) and Tax on Financial Operations (IOF), the absence of fees and the guarantee of reimbursement of up to R$ 250 thousand by the Credit Guarantee Fund (FGC) in the event of a breach of financial institution.

Are people putting more money into savings? On the contrary, withdrawals are outstripping deposits. In the first half of the year, withdrawals from savings exceeded deposits by R$50.5 billion, according to the Central Bank (BC). The volume of withdrawals is the largest in the historical series, which began in 1995.

The behavior of Brazilian investors has to do with different factors, such as the need to withdraw funds for emergency situations, caused by the crisis in the economy, and the interest in more profitable alternatives.

Should I switch investments now? Despite the poor performance of savings, investors must analyze a series of conditions before migrating to another asset, says Martins.

For the specialist, it is essential to understand the operation of each investment, to be patient with the results, to maintain consistency in the investments and to have a vision of accumulating equity over time instead of seeking high gains in the short term in risky assets without the proper knowledge.

Where to start? The best alternative for savings, says Alexandre Brito, financial planner (CFP) and managing partner gives finacap., is the Treasury Selic (one of the modalities of public bonds), in which the investor will have a return of 100% of the Selic and with the risk of the issuer of the Union itself (National Treasury bond).

According to the Finacap partner, there are still several options for banks that offer CDBs (Bank Deposit Certificates) with immediate liquidity and yield 100% of the CDI (Interbank Deposit Certificates) guaranteed by the FGC. These certificates are fixed income securities issued by financial institutions to raise funds and finance activities, such as granting credit.

As Brito explains, savings, under the current rule, yields around 0.72% per month. The CDI, on the other hand, yields 1.04% per month. “Even considering that savings are exempt from income tax and we deduct an estimate of tax from the CDI, even so, savings do not deliver a return comparable to the alternatives presented.”

In addition to the CDB, the One Investimentos specialist also includes LCAS (Agribusiness Letters of Credit backed by a portfolio of loans related to the agricultural sector) and LCIs (fixed income securities created to finance the real estate segment) with liquidity after 90 days, linked to the CDI and exempt from IR.

If the savings exchange is motivated by the fact that the investment does not have a real return above inflation, the financial planner suggests assets such as NTN-Bs (Treasury Direct bonds that are also known as the IPCA+ Treasury with semiannual interest) and debentures incentives, which finance infrastructure projects and have tax exemption on profitability.

Which ones are exempt from income tax? Of the assets mentioned by the specialists, LCI, LCA and incentivized debentures are exempt from Income Tax.

In the case of CDB, the highest rate of IR is 22.5% for investments of up to 180 days, reaching 15% on investments with a term of more than 720 days. The same regressive table applies to the collection of IR for the Direct Treasury. There is also the possibility of levying Tax on Financial Transactions (IOF). Direct Treasury and CDB are subject to collection. Among the exempt assets are LCI, LCA and debentures.