Here in financial coaching we talk a lot about debentures as an investment alternative in fixed income. But you what are debentures?
If you want to know what debentures are, read through and find out not only that, but how it all works and how to invest.
What are debentures?
In fixed income investments, you take your money and lend it to another body waiting for interest. You can lend your money to the government like at Tesouro Direto. You can also lend your money to the bank like CDB, LCI and LCA. That is, lend your money and receive interest as a reward.
Investing in debentures is nothing more than lending your money to a private company. It is an investment model where you lend your money to companies and get your capital back plus interest.
You may ask yourself: why would the company take money from you and not from a bank?
Because in this way, the company is able to have control over the form of payment and interest. It can reconcile the flow of payments to the investor with the maturation of your project. So, in terms of financial flow, funding via debentures is more viable than a bank.
Nominal Debentures
This modality is scarce in Brazil, it refers to debentures that are issued by the company itself and it is responsible for issues and transfers.
Carrying Debentures
In this modality, the entire process is intermediated by an investment platform or securities broker. This intermediation must be registered by B3.
Profitability of a debenture
In comparison to other types of fixed income investments, the debenture has a certain advantage in profitability. However, this profitability advantage is associated with the risk of the modality. Is it complicated to understand? To make it easier, let’s make a comparison.
When you invest in Tesouro Direto, you have more security because this investment is guaranteed by the Government. When it comes to a company, the risks are greater. So to be more attractive to investors, the debentures offer better interest rates. Consequently, profitability is slightly higher.
Debentures have a maturity period, sometimes it is possible to know how much profitability will be before contracting.
Pre-fixed profitability: you already know how much income will be before you even hire.
Post-fixed profitability: this modality is linked to an indexer. It can be indexed to the CDI, or also the Selic Rate. In this case, despite being fixed, the contractor only knows the profitability at maturity.
Hybrid profitability: this modality guarantees part of the profitability and another part is indexed to some index such as the IPCA, for example.
Debentures encouraged
There are some products in this segment that are encouraged. They are exempt from income tax. So, in addition to the interest advantage, you have a tax-free return. This enhances your profitability.
This type of debenture is issued when the company is carrying out an infrastructure project. It is an incentive from the Government for investors who aim to facilitate fundraising by the company.
Risk assessment (rating) and guarantees
Before investing in a debenture you have to pay attention to the rating. Rating is a kind of risk level in which the debenture is classified. The higher the rating number, the lower the risk. The lower the number, the more risky the investment.
Thus, profitability tends to be lower the higher the rating score. When the grade is low, the debenture offers greater possibilities of profit. So, if you are planning on investing in debentures, stay tuned. Check that the rating level is in line with your investor profile.
Some people look for more security and prefer a higher level. More daring investors, on the other hand, prefer risk for the opportunity of greater profits. What’s your profile?
Some debentures offer an additional guarantee in case of bankruptcy. These guarantees may be some property of the company, such as buildings, factories, land and others.
- Floating guarantee : this guarantee gives priority to debenture holders in case of bankruptcy of the company. Debenture holders have priority over shareholders. This guarantee can be carried out through the company’s assets.
- Unsecured guarantee : this guarantee is the most inexpressive, after all, it does not actually express a real guarantee. In the event of bankruptcy or bankruptcy, the debenture holder has no priority.
- Subordinated guarantee: subordinated guarantee debentures offer greater profitability because they are the most risky. In the event of bankruptcy, the shareholder has priority over the debenture holder.
Term and liquidity of a debenture
If you are looking for a long-term fixed income investment, debentures can be a great deal.
There are debentures of different terms, but it is common to see 10-year redemptions.
A disadvantage of debentures is low liquidity. You may even be able to sell your debenture before maturity, but you may end up losing money if it goes down. Full performance guarantee even only at the end. So be careful before investing in this modality.
How to invest in a debenture?
You can seek advice from your investment broker. Today there are digital brokers that make it easy and a lot to invest.
If you want to find a debenture under launch, look for a way to be notified. Otherwise, only buy on the secondary market. Through your brokerage, you can find out information such as yield, maturity and guarantee mode.
Try to invest in a debenture as a way of portfolio diversification. After all, due to the risk involved, it is worth protecting your assets by allocating them in different types of assets.
