Opinion – From Grain to Grain: Know where to invest at the beginning of the plan for the first million

The beginning of the journey to reach the first million is one of the most challenging stages. Inexperience, lack of discipline and patience are elements that prevent investors from going beyond the first stage. I explain the two steps that the investor faces and what you must do in the first step.

Last Wednesday, I outlined five plans you could select from to reach your first goal, namely, reaching $1 million in financial equity.

Reader Nilton wrote to me and asked what would be the best assets to invest in. He wrote: “Is there any specific application, from any Institution that is paying a good return?”.

This is one of the questions I receive the most. The problem is that it is extremely dangerous, as the expected return is not necessarily a realized return. Also, depending on the stage you are in, taking a risk would not be appropriate.

If you are in the first stage of your R$1 million plan, leave this question aside. So what are the steps on this journey?

There are two steps on the way to reaching your BRL 1 million goal: foundation and growth.

The foundation period runs from the beginning until you accumulate between 6 to 12 times the amount of your monthly expenses. The growth period is the next interval that stretches until you reach the goal.

In the first stage, that is, the foundation, it is important to focus on security and liquidity.

I know that many times we are tempted to take a risk, because we heard from a friend that he made 10% to 20% in a month with an application. All in his time. So let’s go to an example.

Consider that you chose Plan 3, that is, to save BRL 1.4 thousand per month and your monthly cost is BRL 5.6 thousand.

The amount of ten times its monthly cost results in R$ 56 thousand. So until you reach that value, your focus is on building the foundation.

Do not think at this point in diversification, or diversify only between short-term fixed income indexes, that is, up to five years.

If you don’t have a financial asset built, it’s important to have a liquidity cushion and low risk that can give you peace of mind. So where to apply?

Above R$ 1 thousand, it is already possible to invest in CDBs of medium banks distributed in brokerages. Also, there are funds referenced to the liquidity CDI for up to 60 days that could be alternatives. Ask your advisor for a list of these.

Public bonds are also an alternative, but will yield less.

At the moment, the CDI index is the most suitable for maturities of up to two years. For bonds referenced to the IPCA, bonds between three and five years should be preferred.

Don’t fall into the trap of buying long government bonds, as someone said they could rise by more than 30% if rates fall. The foundation stage is not the time to risk large fluctuations.

In the foundation stage, you must have short titles, because if you need the resources or at least part of them, you will not suffer any losses. Meanwhile, run away from the savings account.

As you are going to invest in short-term bonds, bank issues are better, as in addition to earning more than public bonds, you have the guarantee of the FGC.

Diversification into other assets and risky alternatives should only be undertaken when you reach the growth phase.

If you save BRL 1,400 per month, the foundation phase will take just over four years. So be patient and take this time to study risky alternatives until you reach the growth stage. That way, you’ll be more prepared and experienced when you get there.

Michael Viriato is an investment advisor and founding partner of Investor House

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