Brazilians are not very keen on investing in the stock market, as shown by a recent survey from the Brazilian Association of Finance and Capital Institutions. It’s not as if they are unaware that stocks are available as an option – the stock market is the second-best known type of investment in the country – it’s just not Brazilians’ go-to investment. As a matter of fact, investment in Latin America’s largest economy is characterized by a risk-aversion approach to money.
Before detailing where Brazilians put their money, it is important to stress that 57 percent of the population doesn’t invest at all – and, for tens of millions of people, the reason is quite simple: a sheer lack of money. Brazil, after all, is still struggling to overcome its worst recession on record. But even among those who are investing, conservatism seems to be the dominating trend.
Relying on savings accounts, however, is not the best move. As the Selic benchmark interest rate is at its lowest point ever (6.5 percent), the safest investment available is also one of the least profitable: only 70 percent of the Selic, i.e. just over 4.5 percent per year.
Brazil’s conservatism, though, is also the result of a lack of information. According to Anbima, while Brazilians know about the existence of the stock market, it doesn’t mean they understand the ins and outs of buying and selling stocks. “Everybody has heard about Vale or Petrobras. Besides, people see newscasters on television every night talking about how much the São Paulo stock market has gained or lost,” said Ana Claudia Leoni, to UOL.
Brazilian investors are afraid to lose money
Investing in the stock market requires sangfroid, especially in a country like Brazil, where the stock market has been quite volatile – due mainly to political problems that hamper the economy. That’s why 42 percent of people, who rely on their savings accounts as their only form of investment, don’t want to diversify their portfolio.
A recent survey by consultancy firm BlackRock also confirms that Brazilians want their money in investments that allow them to pull their assets out at a moment’s notice, in order to avoid exposure to risks. “We have an economy still in recovery, with elevated interest rates and risks,” said Carlos Takahashi, a senior consultant at BlackRock, in a June interview.
Moreover, the Brazilian market doesn’t necessarily reward risk takers. When comparing Brazilian investments in fixed-income bonds and stocks, the former is actually more profitable in the long haul – unlike what happens in the U.S. The next chart shows that for investments over 20 years, fixed-income bonds win 100 percent of cases.