Investment funds | Which ones are reliable? |🥇Read before investing

know what they are investment funds and what are the best options according to your investor profile. The funds work from the purchase of shares and many have dividends.

However, it is necessary to open an account with a reliable broker for you to start investing in this modality.

Want to know more? Read on until the end.

What is an investment fund?

The investment fund is a portfolio that encompasses various financial assets, bringing together shareholders, investors who buy applications. An investment fund considered good, always diversifies its applications between: commodities, stocks, government bonds, fixed income, derivatives and foreign exchange applications.

The money that the investor invests in the funds is converted into shares. This investor will have a number of shares equivalent to the amount invested. However, as the days go by, the value of this share will increase, so the balance invested will be multiplied by the value of the share. It is important to emphasize that the equity value of investment funds is the total of all resources invested by the shareholders.

These resources are managed by an administrator or manager.

Understand what investment funds are?

Investment funds invest the assets of various investors, called shareholders. The earnings that will be obtained from this fund through the participants' equity. These will be deposited proportionally according to the value of each share.

There will always be a professional manager responsible for managing the money of all these shareholders. Therefore, all investment decisions are pre-defined according to the macroeconomic scenario in Brazil. The intention is for the fund to perform well and be successful. After all, you will be trusting your investment in the hands of a professional manager.

In practice, good investment fund management will determine the appreciation or depreciation of shares. In other words, the better the fund's management and performance, the greater the appreciation.

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Mutual fund how does it work?

Mutual funds combine various financial assets. The main objective of the investment fund is to help the shareholder to invest in a profitable portfolio.

However, there are CVM rules for investing in assets. Let's say your manager can decide to buy stocks, commodities, derivatives, currencies and even invest in the international market. However, to protect each investment fund shareholder, the manager can invest up to 20% of the fund's equity in the same institution.

In other words, it is a rule of investment funds to work with capital diversification. Mainly for shares of a publicly traded company, in this case the fund has a limit of up to 10% of the invested equity. 5% is also reserved for other issuers.

In the case of federal government bonds, such as direct treasury, there were no limits on investments or percentages invested in the fund. In general, all funds are inspected by the Brazilian Securities Commission – CVM.

In practice, CVM discriminates how all applications must take place in investment funds, including applications in the foreign market.

How to choose an investment fund?

To help you choose which fund you want to invest, there is a classification according to the risk of the capital exposed to the market. There are 5 risks:

  1. Risco of liquidity
  2. management risk
  3. Market ridge
  4. Credit risk
  5. Legal cliff

But if you buy a share in a good fund, just be concerned about liquidity, market and credit risks. When you decide to invest in a fund, ask your broker to inform you about the risks. Sometimes, this information is displayed on the platform when buying your share of investment funds.

In the brokerage below we have the classification in colors, where yellow means: moderate risk, red high risk and green low risk.

Brazil's largest investment funds

In the funds, the equity of each investor will be divided into shares. In other words, when the investor invests his money, he is actually buying shares in the fund. For example, if you buy a share for R$15 and deposit R$15 at the brokerage house, you will be buying a thousand shares from that Investment Fund. Understand?

To help you choose your fund, see the expected return for 12 months. For example, to calculate the profitability of investment funds, look at the valuation of shares. If you bought 1 share for R$15 reais and after 1 year this share went to R$20 reais. You had a 1-year appreciation of 50% of your investment. Would it pay to continue investing in this fund? Think about it.

Investment Fund Fees

There is a fund administration fee and a performance fee. In other words, you must remunerate the administrator of your investment fund. Therefore, when you choose an Investment fund, in addition to evaluating the value of the shares and the risks. Calculate the costs that will be discounted with the valuation of these shares. That way you will find out if the profitability value after the discounts pays off.

The administration fee will exist in all investment funds, it can vary between 0,5% and 4% per year. This charge must happen gradually during 1 year. As for the investment fund's performance fee, it will be charged by the administrator.

The investment fund's performance fee is agreed in advance with the investor. So that he is not surprised. A common example that happens in the market is when a good fund manager promises higher returns than previously agreed. In other words, in this case you will pay for the good administration of your manager.

Ibovespa

One of the most famous funds in the stock market is the famous Ibovespa. For example, if your fund has earnings higher than the index in a certain period, for example 20% above the Ibovespa. This excess performance rests with your fund manager. But don't worry as this must be arranged in advance.

How to declare investment funds?

Beforehand, you need to know whether or not you should declare your income tax. Below are the IRS requirements to declare taxes:

  • 12-month income greater than or equal to BRL 28.559,70
  • Non-taxable or taxable income only from a source greater than 40 thousand
  • Rural worker with annual income above R$ 140.798,50 (annual gross income)
  • People with assets above BRL 300 thousand
  • Gains on assets and rights under alienation
  • Performed operations on the futures market, stock exchange or similar
  • It intends to offset losses in 2020 or later with its rural activity
  • Did not declare taxes in the previous year as he was not resident in Brazil

If you meet one of these rules, you must declare it. But, understand that Income Tax will be charged at different times. First, the tax will be charged upon redemption of the investment. Afterwards, the tax will be charged once every 6 months through the quota system.

Previously, the rule for long-term funds has pre-defined rates according to the taxation system. But, as a rule, the longer the application period, the lower the income tax rate.

However, the Internal Revenue Service divides the Funds between long term and short term, as in the example below. These are the amounts you will pay in income tax.

  •  Short-term applications of up to 180 days have a rate of 22,5%
  •  Above 181 days for short-term funds, a 20% rate is charged

For long-term applications it is charged:

  • 22,5% for 180-day applications
  • 20% for applications from 181 to 360 days
  • 17,5% for applications from 361 to 720 days
  • Over 120 days, only 15% of the income tax rate is applied

What is eat quotas?

Come cotas is a mechanism that anticipates the tax on your investment fund. This tax is generally charged between the months of May and November. 20% is charged for short-term investment funds and only 15% for long-term investment funds.

The Income Tax collection mechanism is given in 2 moments. First, when the investment fund is redeemed and through the mechanism called come quotas. Let's say that come quotas is a system of partial redemption of investor's quotas.

In this way, the costista will pay the tax due to this system created by the government. But when the investor makes the liquidation of his investment fund, he will always receive only the difference between the system with quotas that has already been paid and the additional rate corresponding to the investment. In this case, the table stipulated by the Income Tax rate must be considered.

It is important to emphasize that come quotas is a system that does not focus on ETFs, FIIs and Equity Funds.

How to declare investment funds in the 2020/2021 income tax

Step 1: Request the income report from your broker. Then download the program to file income tax with the Internal Revenue Service.

Step 2: Open the form with the name of income subject to exclusive/definitive taxation.

How to declare investment funds in the 2020/2021 income tax

Step 3: Select code 06 (income from financial investments). In the case of real estate funds, you must declare tax-exempt income under code 26. For other funds, continue with code 06.

Step 4: When you open the Income Tax declaration form, fill in the information, such as: CNPJ of the paying source (name of the investment broker), types of beneficiary (holder) and the amount of the application. program download to declare

Step 5: Income will be shown in its net form and effectively correspond to the investment fund's profit. Therefore, be careful when informing the CNPJ in the income tax return. Do not confuse the broker with the person responsible for tax liability.

Types of investment funds

There are many investment funds in the financial market and you can choose according to your investment profile. Also assess the main characteristics of each fund. Below we made a list describing the main funds that exist for you to understand if it suits your profile.

Fixed Income Fundsstock fundindex fundREITsexchange fundgold backgroundinternational fundsMultimarket fundscryptocurrency fund

Fixed Income Funds

Fixed income funds concentrate their investments in direct, post-fixed and fixed-rate treasury bonds. It is an ideal portfolio for investors looking for more security. In other words, conservative investors, but this investment fund does not always guarantee good liquidity and high security. For this reason, some investment advisers tend to force fixed-income bonds along with debentures.

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stock fund

The equity fund is able to diversify investors' capital into major stocks. It is interesting for the investor who is unwilling or unwilling to choose stocks alone. This is a popular choice among many equity investors.

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index fund

The investment index fund is also known as ETFs. ETFs are able to replicate an investment portfolio with good results or good performance. It is very common to find ETFs of equities, real estate funds and fixed income. One of the advantages of this fund is not having the famous “administration fee” or having a “reduced administration fee”. This happens because the management of this fund happens passively. In other words, the fund is able to imitate the result of an economic indicator.

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Real Estate Funds FIIs

These investment funds prioritize only the real estate sector. They can be divided into 3 subclasses, the first of which is the paper fund where the manager invests in securities linked to real estate credit, such as LCI and CRI.

There are also brick funds that invest in fixed and corporate properties. Then we have the funds that prioritize shares of other real estate funds in the financial market.

All SIEF shares are traded on the stock exchange, so income also occurs through the appreciation of the shares of these funds. REITs can distribute dividends to brick funds, this is very interesting for those who want passive income.

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exchange fund

The exchange fund concentrates capital only in foreign currency. It is very common for the administrator to trade in dollars or euros. The manager will not necessarily invest his money in the foreign exchange market, but will explore earnings options through exchange fluctuations. For example, the manager can invest in an asset exposed to currency appreciation in the medium or long term.

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gold background

As gold is increasingly scarce, there are funds that hedge the portfolio. This is an alternative for moments of high volatility in the stock or equity market. Gold funds are worth considering in this scenario.

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international funds

International funds place their investment in financial products or assets on the international market. This usually happens when the risk scenario is greater in the Brazilian market. This fund is also suitable for investors who want to diversify their investments.

In this way, it is possible to have a balanced risk on the capital invested in both the National Market and the International Market.

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Multimarket funds

This is one of the most famous funds, as the name says, we have a multimarket fund. In other words, we use a multimarket strategy where the manager will be able to invest in various financial products.

Investments are concentrated in stocks, derivatives, fixed income, currency market, gold and many other examples. However, this multimarket fund is only suitable for the moderate or high risk investment profile.

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cryptocurrency fund

Cryptocurrencies are on the rise and are responsible for a large portion of investors' resources. The cryptocurrency fund is for an investor profile that wants high profitability and bears high financial risk. As the appreciation of cryptocurrencies is exorbitant, this fund is ideal for the bold investor.

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Compare investment funds

If you still don't know which investment fund to choose, use a “fund comparator”. First, search for the fund's profitability in: 1 year, 2 years, 3 years and 4 years.

Below, we made a table equivalent to the profitability of the CDI, Ibovespa and Poupança compared to the XP Fund.

You can do the same profitability scheme on the "funds comparator" website, just choose the name of your fund as we did:

investment fund buyer

Then filter your fund by management fees, because although the rate of return compared to CDI, Ibovespa and Poupança is good. Administration fees can partially eat up your financial application.

Also look at the volatility of investment funds, this can be an ally for your applications. For example, the greater the volatility of your Investment Fund, the greater the uncertainty of the result. In other words, low volatility guarantees more confidence for investors with a conservative profile.

Finally, see the risks that that investment fund offers. Try using an investment fund comparator search by: Fund CNPJ or Name. It's pretty easy!

The investment fund comparator will be an incredible ally for investors.

investment fund redemption

The redemption of the investment fund is simple and can take place through your broker's platform. But, first understand the redemption period of your Investment Fund, it will make a difference at the time of Redemption.

you will come across the abbreviations: D+, D+1, D+2, D+3 and others. All these terminology define the deadline for you to be able to withdraw your money. This determines the redemption period.

However, in order to redeem the Investment Fund, it is necessary to understand how the transaction works. First, will it be done in debit or credit? At the first moment when the investor requests the redemption of his share, the brokerage will have to give the deadline to return the money. First, your broker will settle the quota and add it to the term.

The formula used for redemption is usually: Sum of term + Settlement

This formula is used so that the investor understands how long the quota will turn into money in his account. Once the investor understands the settlement period and the quotation period, the redemption will take place in these 2 ways:

  1.  The quotation period is the time it takes for the units to be redeemed and converted. The Investment Fund manager must convert the assets into cash. For this, the fund determines how many business days the manager needs.
  2. The settlement period is when the manager has already converted the shares and has the money. In that case, the broker must transfer to your account.

With the quotation and settlement deadlines understood, the redemption period is missing.

The redemption period is when we add the quotation time plus the settlement period. That's when you'll know when your money will land in your account.

Once you understand all this, it's simple to perform the rescue:

  •  Enter the broker and request the redemption of shares
  •  The administrator must accept the redemption request
  •  In a few days, these shares, according to the redemption period, turned into money in your account.

It is important to point out that long-term investments have longer redemption times, such as 30 or 60 days to convert shares on the market and then into cash for your account.

What is the acronym D+?

The abbreviation D+ is used to determine your redemption period in business days. In case an investment is D+2, a quote will take 2 business days for the transaction to be completed at the broker.

These acronyms are frequent at the time of redemption of investment funds and can also indicate the duration of the financial compensation to your account.

Equity investment fund

Equity investment fund also known as FIP are closed-end funds. FIPs allow investments in publicly or privately held companies. They are also available for you to buy on the stock exchange, however they include shares for limited partnerships.

This would be the main difference between equity investment funds and other funds. They allow holdings in privately held companies. You may know these funds as private equity.

In this case, participation of companies still under development are considered. However, private equity must maintain at least 90% of the shareholders' equity in securities of publicly-held companies (stocks). Simple debentures can represent up to 36% of equity.

How to create an investment fund?

To create an investment fund you need authorization from CVM. Then appoint a manager qualified by the Brazilian Securities and Exchange Commission to manage your fund.

The steps below show you how to start your Investment Fund:

  1. Get a CVM-approved manager
  2. Open a CNPJ for a company to manage investor resources
  3. Speak with the Brazilian Association of Financial and Capital Market Entities to adapt the best practices of investment funds
  4. Determine the Initial Capital to contribute to the fund

All these 4 Steps can take an average of 6 months to 2 years for your fund to be fully regularized and in line with good market practices.

investment funds ranking

As the profitability of investment funds accumulated in 12 months, we notice that multimarket funds and stock funds accumulate interesting profitability in the general ranking of Brazil's largest investment funds.

View the top 10 based on profitability:

  1. Solit Multimarket Investment Fund with 573% return
  2. Hamburg multimarket fund for private credit abroad with a return of 529%
  3. Thunder Bolt multimarket quotas with 492% profitability
  4. R&C Exclusive multimarket fund with a return of 476%
  5. Kona IE private multi-credit fund with 427% return
  6. Run Morro de São Paulo of private credit with a return of 290%
  7. Odd + Capital I of private multimarket funds with a return of 173%
  8. Guarany stock fund with a return of 151%
  9. Xingó 125% skill current stock fund
  10.  ABC Multimarket Investment Fund with a return of 122%

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Largest investment funds in Brazil

We separate the largest equity investment funds with performance in recent months with more than 100%.

Below we have the ranking of equity funds:

Brazil's largest investment funds

Largest stock investment funds in Brazil

We also separate 9 options based on the profitability of fixed income funds for investors with a conservative profile.

Brazil's largest investment funds,

Largest fixed income investment funds in Brazil

Brazil's largest investment funds,

Largest foreign exchange investment funds in Brazil

Then 10 interesting options in Foreign Exchange Funds, those that monetize through foreign currency, mainly the dollar and the euro.

Conclusion: Investment fund is worth it?

Yes, investment fund is worth it. Mainly considering the fact that you trust your assets in the hands of a professional manager. One of the great advantages of investment funds it will be the value of the shares that is usually accessible to novice investors.

All investment funds are considered safe, as they are authorized by the CVM to operate. Therefore, always be wary of applications where the fund does not have CMV authorization. Also be suspicious if the investment fund does not comply with instruction 555 of the Brazilian Securities Commission.

Always choose an Investment Fund with a low management fee, unfortunately fees are not always so attractive and can eat up all the profit from your investments. The most attractive funds that may be worthwhile are: multimercados, stock funds, cryptocurrencies and ETFs (there is no administration fee.).

Use all our tips here to choose a good background. Don't forget to open your brokerage account, it's completely free.
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