After all, what is fixed income? And variable?

With the increase in the Selic rate, fixed income is back on the radar of investors, who don’t need to risk so much to get good financial returns. The first point is to understand that the main difference between fixed and variable income is in the form of remuneration. Furthermore, the risks of these two types of investment also differ.

Fixed income has defined remuneration rules, in which it is possible to know whether the investment will have a return linked to an index, a predefined rate or both simultaneously. “One of the factors that define the remuneration of fixed income is the interest rate”, explains Gabriel Sena, investment specialist at Top Gain. The remuneration of variable income, in turn, depends on several factors, the companies, the company’s profits, its operating results and the macroeconomic scenario. “As they are companies and assets that depend on a positive operating result, there is no predictability of fixed income. Variable income has a greater risk than fixed income, but also opportunities for greater gains”, says Sena.

It is important to remember that any type of investment carries some level of risk, including fixed income. “During the pandemic, for example, fixed income bond prices fluctuated greatly due to the economic uncertainties generated by the crisis. In some cases, bond prices fell, resulting in losses for investors who tried to sell their bonds before maturity. In addition, interest rates can change, affecting the value of existing fixed-income securities”, explains Luciana Maia Campos Machado, academic superintendent and finance professor at Faculdade Fipecafi.

“When we talk about fixed income, the main risk is credit (default). The more solid and secure the debtor, the better, but the returns tend to be lower as well. In general, increasing the risk, increases the return. In terms of risk, government bonds are the safest, considered exempt from this risk, in practice. Next come the big banks, then the medium and small banks and finally the non-financial companies”, evaluates Valter Police, financial planner by Plan. “In variable income there is no credit risk, since there are no loans and the main risk is the market (oscillations)”, adds Police.

“In summary, fixed income can indeed present losses, especially in times of economic instability. However, the risk associated with investments in fixed income is generally lower than investments in variable income, provided that the investor makes a careful analysis and diversify your investments”, agrees Professor Luciana.

Idean Alves, partner and head of the trading desk at Ação Brasil Investimentos, says that fixed income investors should always keep an eye on the issuer, to whom they are lending, whether the bank, the company or the State are able to pay the combined amount until maturity. According to him, it is important to keep an eye on the applied time. “As much as the investor will not need the capital, very long investments can be subject to premium or discount if the investor needs it ahead of time. That is why it is important to diversify through different maturities. Otherwise, the investor will have an excellent ‘debtor’, at a good rate, but with the risk of having a loss of 20% to 30% due to an early exit, which ends up becoming a relevant risk and little noticed by most investors”, comments Alves .