Invest your money based on expected future profitability – 12/09/2021 – Marcia Dessen

Anyone who observes the evolution of the annual CDI rate in recent years will see a consistent and continued fall in this financial indicator. In 2016, the CDI accumulated 14%, in 2017, 9.93%, and continued to fall to 2.76% in 2020.

It is easy to understand the disappointment of investors accustomed to earning attractive profitability in the fixed income market, without taking greater risks to try to earn a little more.

The profitability of savings and bank deposits was disappointing compared to previous years. The performance of investment funds reflected this decline, as even those that invest part of their equity in stocks, interest, foreign exchange and international assets maintain a large part of the portfolio in post-fixed rate assets that accompany the economy’s basic interest rate.

Throughout 2020, when the Selic was at a level of 2% per year, many investors left the fixed income in search of better profitability. The variable income market, dollarized and international assets, despite being very volatile due to the impacts of the pandemic on the economy, provided competitive profitability to multimarket funds, for example.

The rise in inflation, among other factors, forced the rapid rise in the Selic rate, which leaves the level of 2% in February, and should reach around 7.5% in December this year, according to the Focus report of the Central Bank.

Observing the past profitability of the various applications will not be of any use. We still don’t know what the accumulated variation of the CDI will be in 2021, but, with no chance of making a mistake, we can say that it will be higher, much higher than that calculated in 2020.

The performance of funds that invest in assets linked to an inflation index will also be very different from that recorded in the past due to two variables, the inflation index itself, which rose a lot, and the fixed interest rate that makes up the remuneration of these assets . These assets lose value when the interest rate rises, 2021 trajectory, and gain value when the interest rate falls, as happened in previous years.

The Ibovespa, which measures the performance of the most traded shares in the market, had a disquieting performance.

Those who did not have money invested in this market and only observe the 2.92% appreciation accumulated in 2020 may think that the stock market had a quiet year, with a performance slightly superior to that of the CDI.

However, you will be surprised by the monthly highs and lows recorded during the year. In March, down 29.90%, and in November, up 15.90%. In 2021, the seesaw continues and the Ibovespa accumulates a loss of 0.48% until August.

The dollar rate also sailed through turbulent waters, accumulating a high of 19.36% in 2020, when it reached the rate of R$ 5.90, on May 12th. Calmer, despite the volatility, the forecast is for the dollar to be around R$ 5.10 at the end of 2021.

The real estate fund market is another example of how past profitability can be deceiving. In five years, the index accumulates an appreciation of 54%; in three years, up 27.96%, and probably attracted many investors in search of higher profitability than the traditional fixed income market.

However, the real estate market was one of the segments most affected by the pandemic, especially in the sector of corporate buildings and large shopping centers. In 12 months, it accumulates a negative return of 2%.

The moral of the story is that past profitability is not a good yardstick for making investment decisions. Expected future profitability is a better adviser.

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