By Hellen Borges – Swood Convida
That’s always the hardest question anyone can ask me. And answering it is practically impossible if those who ask do not understand what investing is and what they are looking for with it.
For this incursion into the complex and giant world of investments, I want to propose a series of reflections so that each reader can understand which investment makes sense for their profile and plans and, based on that, select where they will put their money.
Investing is applying capital (money) in order to make a profit. And the condition for investing is saving. In other words, set aside a portion of your earnings for this purpose. However, making your money work for you, as many say, is not such an easy task.
The first thing you need to define is what your goal is. Which could be: complement what you will receive from retirement; buy a property; have a cash reserve; supplement your monthly income or any other project.
Then you need to pay attention to the four variables that need to be taken into account when you decide to make an investment:
- In short: will leave your money invested for a few months or years. When you already have a date on which you will need the financial amount back.
- Long: will leave the money invested for several years. You must have no plans to use the money during this period.
Type of Profitability:
- Fixed: you know exactly how much profit you will have monthly. Borrow your money at a fixed rate of interest. Example: Savings, National Treasury, CDB (Bank Deposit Certificate), LCI (Real Estate Credit Bill), etc.
- Variable: Return on investment is unpredictable as it varies with market conditions. Example: Shares of companies traded on the stock exchange, Investment Funds, Foreign Exchange (varies with the exchange rate), Cryptocurrencies, etc.
- High: You can gain a lot, but you can lose not only the profit but also the amount invested.
- Low: You are not at risk of losing the amount invested, but you will also have a low and usually predictable return.
- High: is when you can sell your investment at any time and turn it into cash. Example: Stocks in companies you can sell on the stock exchange and treasury bills.
- Low: when you can’t turn your investment into cash quickly. Example: real estate and long-term investments that the investor cannot sell or has a significant loss in the form of a fine to sell.
To achieve your goal you need to take into account the dynamics of the investment market.
The more security and predictability you look for in investments, the lower the return (profit) and you will have little risk of losing what you invested.
The more risky the investment, the greater the possibility of profit in less time, however, in this case it is possible to lose the money invested.
Therefore, before investing, it is important to define your objective when making the investment and, mainly, what your investor profile is.
If you are more aggressive and feel comfortable taking more risks to get more profit in less time and deal well with the fact that you might lose some of your invested money. Or if you are more conservative and prefer to earn less and take longer to gather the money needed to make your dreams come true, but having more security that you are not at risk of losing your money and you know exactly how much profit you will have on the investment.
And always remember that when looking for where to invest, it is important to study and be informed about how this investment works, especially the higher risk investments to avoid losing part of your savings.
As in most things, to be a good investor you need to study, practice, be disciplined and not give up. There are investments available for all types of people, values, goals and projects. I invite you all to delve into this world full of possibilities.
Hellen Borges has a degree in Business Administration from FGV, a postgraduate degree in Strategic Management from FIA and specializations in innovation and digital transformation at UC Berkeley and Saint Paul. With 15 years of experience in the logistics and services sectors, she is currently Head of Operations at Swood responsible for bringing the operation to Brazil.