If you follow the news you will always see news related to Ibovespa. When it comes to the financial market, knowing this index well is essential to making good investments.
In this article, we will cover all the elements necessary to make good investments. You will understand what the Brazilian Stock Exchange Index is. In addition, you will know how to invest in funds that replicate the Ibovespa.
Amid so much information about dollar, oil, and stock exchange. What is the Ibovespa about?
What is Ibovespa
The IBovespa, short for the Bovespa Index, is one of the main indicators of the shares traded on B3. In turn, B3 is the Brazilian stock exchange.
Since 1968, this index has been responsible for translating the stock’s stock situation. However, over the years, he changed his analysis. Currently, it is possible to trade shares of hundreds of companies on the stock exchange. Given this scenario, how to define a satisfactory parameter? How to make an analysis that contributes to investors’ decision making?
Ibovespa was created with this objective: to efficiently represent an average behavior of the stock market.
Due to the advancement of technology, today the Ibovespa is calculated in real time. Observe and analyze all spot market negotiations.
Its function is to indicate the performance of the stock exchange in general. Whether stocks are rising, falling or sideways. It is a kind of thermometer of market expectations for publicly traded companies.
Some large companies may have a greater impact on the index. That is why it is common to hear that a certain company has pulled the index down or otherwise. Despite being composed of more than 60 companies, some companies have a greater weight on the index.
When the Ibovespa falls, we understand that the stock market’s performance also fell on average. When the index rises, we understand that the scenario of the papers that are part of the exchange is favorable. Through this, we understand the functioning of the financial market.
Ibovespa portfolio
There are some criteria that companies need to have in order to be included in the Ibovespa portfolio.
- Regularity in the trading of shares, about 95% of the trading sessions
- Stock value must be relevant, minimum 0.1% of the total volume traded in 1 year
- Companies cannot be in bankruptcy
- Does not consider Pennes Stocks (shares with an average price below one real)
Through the negotiability index, companies that meet these criteria are ranked by relevance.
This index considers the financial volume and the number of shares traded. The theory portfolio includes companies that represent 85% of trades in the period.
Each company has a different weight on the index. We call this the Free float. How is the free float calculated? It is calculated based on the total market value of the shares available for trading. The greater your market share, the greater your participation in the index. However, to avoid an imbalance, this participation has a ceiling of 20% of the total.
Every 4 months, the composition of the Ibovespa portfolio is reassessed. Exactly the following periods are considered:
- January – April
- May – August
- September December
On the B3 website you will find detailed criteria on the requirements to be present in the index portfolio.
What is ETF?
Exchange-traded fund – Also known as an index fund, ETFs are investment funds that are traded on the stock exchange as if they were shares.
Some ETF portfolios replicate the indices. An example of this is Bova11. Check out some characteristics of this type of fund.
- Low administration fee
- An immensely diverse portfolio
- Affordable for the small investor
- Little manager influence (passive management)
- Limited portfolio composition
- Low liquidity
ETFs allow investors with a single brokerage fee to invest in several shares simultaneously. So, with little investment it is possible to build a portfolio.
By investing in ETF, you don’t need to have a lot of time to study assets. In addition, there is also no need to study the fund manager’s history, after all he has to replicate the index.
Through investing in ETF, the investor saves time with automatic reinvestment of dividends. That is, whatever the fund profits, it reinvests in shares. It may not be a good option if you want to live on an income.
The portfolio that replicates the Ibovespa is composed of shares that have liquidity and a higher market value.
How to make money by investing in the ETF BOVA11?
The iShares Bovespa Index Fund (BOVA11) is an investment fund. This fund reflects the Bovespa index (Ibov). It gathers resources to acquire shares proportional to the index. For this reason, it tracks the performance indicated by the index. However, the question remains: is it worth investing in?
Although there is a statement that says that in the long run the CDI can outperform the stock exchange. This information does not apply. There are some risks. However, due to the evolution of the index measurement tools, this no longer occurs.
The index has great potential to mirror the market if it continues to maintain its current form of valuation.
So if you want to invest in dozens of shares at once, the ETVA BOVA11 can be an alternative. One of the advantages of BOVA11 is that it tends to vary less than stocks. Because it is very diverse and a fall in one stock can be offset by the rise in another. The main companies in the BOVA11 portfolio are Itaú, Bradesco, Petrobrás and Vale.
If you don’t have a lot of financial control, it may be a good alternative. After all, dividends are automatically reinvested. In other words, not having money falling into your account always, you do not run the risk of spending it.
On the other hand, the presence of stocks that vary a lot can damage the income. You do not have control over all the shares that make up the fund.
So if you want to invest in variable income but don’t have the time. BOVA11 can be a good option. It is a fund that simplifies and makes investment in the stock exchange very practical.
Now if you prefer to have more control over the shares. The best option would be to try to invest separately. In other words, invest on your own.
