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There are differences from Fixed Income vs. Equities which are essential to know, especially in order to make good profits in the investment market. You need to understand all the methods and strategies to create a good foundation. Check them out below. 

Fixed Income vs. Variable Income 

Before entering the investment market, investors need to understand the difference between Fixed Income vs. Variable Income. In the first case, we find Treasury Direct shares, RDBs, LCI, LCA, among others. 

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On the other hand, Variable Income includes free shares, Real Estate Funds, Investment Funds, among others. In short, investors need to know more about the market before choosing one of these options. 

When investors understand these classifications, they can obtain the desired return on their investments. The dynamics that define this classification determine how profitable it will be, as well as establishing the risks and returns. 

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Main types of investments

Before getting started in the investment market, people need to understand all the concepts, methods and strategies for investing safely. When we think of the main types of investment, we automatically refer to two categories: Fixed Income and Variable Income. 

They are classified according to the return expected from an investment. Fixed Income investments, as their name suggests, pay a fixed return established at the time of investment. 

In Equities, on the other hand, it is impossible to determine what investors' final return will be. After all, a stock's performance is determined by demand and future expectations, which cause the value to fluctuate on a daily basis. 

Risk and Return

If you've been in the investment world for a while, you know that there is no such thing as a risk-free investment. However, if you follow the right methods and strategies, you can invest safely and reduce the risks. 

The return on investment, i.e. how much the money invested will yield, is determined by risk. In this sense, risk can be positive or negative, and refers to the possibility of operations bringing the expected return or not. 

When an investment is considered riskier, it means that it is more subject to uncertainty. In this sense, its return will be higher if expectations are met as expected by the investor.

However, regardless of the risks involved in an investment, shareholders must first define their investor profile. In other words, select the shares that correspond to the risk you want to take in the market. 

There's nothing wrong with investing in a risky asset, but it must match your profile. In addition, the stock should not have a significant weighting in your assets, and it should be well diversified. 

Diversification 

Diversification is one of the most important concepts in the investment market. After all, when the investor follows this strategy, it is possible to reduce the risk of the portfolio. This procedure is nothing more than composing the portfolio with a diversity of stocks, reducing the correlation between stocks. 

It is important to note that investors' portfolios are subject to systemic and non-systemic risks. In the first case, it doesn't affect the entire economy, as happens in major economic crises. 

On the other hand, the non-systemic ones are those that affect companies, such as specific funds and investments that are not part of the whole system. Examples include changes in legislation, changes in taxation, among others. 

Fixed Income Concept

When investing in Fixed Income, shareholders already know in advance what the return will be at the time of the operation. After all, as the name suggests, the products have maturity dates and an index that bets on what the final return will be. 

Generally speaking, when investing in fixed income, shareholders are lending their money to an institution or government. In return, they receive the amount plus interest, as long as the amount is held until the maturity date. 

Concept of Equities

The difference between fixed income and variable income is quite clear. As the name suggests, in Variable Income there is no forecast of income at the time of investment. In other words, investors do not know how much they will receive in the future, as is the case with fixed income. 

In this sense, it is possible to make or lose money. The price varies according to investor interest in the asset, for example. The more people sell, the more the price falls. On the other hand, the more people are buying, the price will rise. 

The biggest problem in Equities is undoubtedly the mood of investors, which is defined by various factors. In other words, demand can be influenced by the national and international political scenario, inflation, interest rates and so on.

Types of Fixed Income

The investment market offers a number of alternatives for Fixed Income. Check them out below: 

  • Public Bonds: These are all bonds issued by the National Treasury and are used to raise funds;
  • Private: These are bonds issued by banks or private companies. The logic is the same in both cases: the shareholder lends money and receives interest as income. 

Types of Equities

As well as Fixed Income securities, you can find a number of opportunities to trade in Equities. Check them out below:

  • Equity Fund;
  • Actions;
  • Futures contract;
  • Options Market;
  • Real Estate Fund;
  • Commodities;
  • Agricultural product; 
  • among others. 

As far as indicators are concerned, the most relevant is the Ibovespa Index. The main objective of most stocks is to outperform this index, which is used as an average representation on the Stock Exchange. 

Choosing between fixed and variable income

Although there is a difference between Fixed Income and Variable Income, this does not mean that one is worse or better than the other. It all depends on the investor's profile. 

In this sense, by defining your objectives with the application, you can define the best choice for your situation. In addition, the choice also involves the payback period, be it short, medium or long. 

Before investing in any option, remember to consider the investment tripod: profitability, liquidity and security. This is the best way to invest safely while reducing risks. 

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