This year will be remembered as a year of breaking records for Brazilian capital markets. For the first time, São Paulo’s B3 stock exchange reached the historic level of 1.3 million retail investors, roughly the same number of active investors on Tesouro Direto, a system which trades Brazilian government bonds. 

Brazilians are becoming more and more interested in their finances, with the country’s lowest benchmark interest rate ever, controlled inflation and an incoming pension reform, making people reconsider how they should prepare for the future.

</p> <p>However, stock market and bond investors are still a minority in Brazil and the increase in their numbers is just the tipping point of a much-needed change in Brazilians&#8217; financial behavior.&nbsp;</p> <h2>How Brazilians invest</h2> <p><a href="https://www.anbima.com.br/data/files/25/50/2D/8C/0BBB96109FF4F696A9A80AC2/RaioX_investidor_2019.pdf">Research by Anbima</a>—the national association of financial market organizations—shows that the average Brazilian investor is far more conservative than B3’s latest record implies. In 2018, 42 percent of Brazilians had some money invested in financial products (whether they started last year or had them previously); among them, 88 percent invest in savings accounts, Brazil’s most common form of investment. Private pensions come in second, with only 6 percent, followed by <a href="https://brazilian.report/money/2019/09/19/corporate-bonds-booming-brazil-interest-rates/">private bonds</a>, with 5 percent.&nbsp;&nbsp;</p> <p>This is no surprise, as 48 percent of Brazilians believe financial security is the most important part of investing. In Brazil, savings accounts are synonymous with safety, as the Brazilian Deposit Insurance Fund—a private entity similar to the U.S.&#8217; Federal Deposit Insurance Corporation (FDIC)—makes sure accounts with up to BRL 250,000 in funds are protected. Furthermore, money can be withdrawn at any time and it is tax free.&nbsp;</p> <p>There is a suggestion, however, that this &#8220;safety-first&#8221; attitude may have started to change. In 2017, 54 percent saw security as the main advantage for investments, while the number of people that saw profit as the most important aspect increased to 19 percent. Experts suggest this could be down to reductions to Brazil&#8217;s benchmark interest rates, which decrease<a href="https://brazilian.report/money/2019/06/04/luxury-homes-brazil-millionaires/"> the returns of fixed-income investments</a>.&nbsp;&nbsp;&nbsp;&nbsp;</p> <h2>Who are Brazil&#8217;s investors?</h2> <p>The conservative behavior of Brazilian investors could be explained by the demographic profile of the average investor. According to research, the typical Brazilian investor is a married 42-year-old man, living in the Southeast. They have jobs and an average household income of BRL 5,000.&nbsp;</p> <p>But this changes according to the form of investment. Private pensions, for example, are more appealing to older and more educated markets, as their average investors are 45 years old and 57 percent have college degrees</p> <div class="flourish-embed" data-src="visualisation/671542"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <h2>Does knowledge make a difference?</h2> <p>The data also revealed that increased knowledge about different forms of financial applications doesn&#8217;t necessarily translate into investments in Brazil. When asked by researchers, interviewees recognized seven kinds of investment, on average. However, the share of people who actually put their money in them was much smaller. The best example for that are stocks; while 73 percent of the population knows what they are, only 2 percent invest in them.&nbsp;</p> <p>Another surprising finding was how conservative people are when it comes to looking for information about investment. Forty-two percent rely on their bank managers or brokers, while 33 percent turn to friends and family for advice. Investment-related news websites, forums or blogs hit 28 percent, while the mainstream media came dead last with only 1 percent of people consulting them for investing information.&nbsp;&nbsp;&nbsp;&nbsp;</p> <p>There is a lack of basic information about standard forms of investment also. When asked if there is a minimum amount to create a savings account in Brazil (there isn&#8217;t), 36 percent of people said you needed at least BRL 100 to set up such an account. Fifty-seven percent believed that to become a shareholder, a minimum of BRL 1,000 is required.</p> <p>A report from <a href="https://oglobo.globo.com/economia/pequenos-investidores-ampliam-presenca-na-bolsa-ja-influenciam-cotacao-das-acoes-23983740">newspaper <em>O Globo</em></a> suggests this may not be the case for much longer. Inspired by social media influencers—especially fund managers who have profiles on Twitter—and independent research houses, individual investors have shown more interest in learning about finances, the results of which are shown on the stock market.&nbsp;</p> <p>According to the newspaper, 33 of the 65 companies on Ibovespa—Brazil’s benchmark stock index—doubled their individual shareholder base since 2014. The trend is even more poignant on small caps such as Via Varejo, Banco Inter, and Oi, which have seen oscillations connected to the reactions of individual investors to the daily news cycle.&nbsp;&nbsp;&nbsp;</p> <h2>What about those who don’t invest at all?  </h2> <p>Anbima data shows that the majority of Brazilians don’t invest anything at all, but the number decreased from 54 percent in 2017 to 50 percent one year later.&nbsp;</p> <p>The reasons quoted by 80 percent of interviewees vary from lack of money, low salaries, unemployment or unexpected expenses—factors that also reflect on the poor economic conditions Brazil currently faces.&nbsp;&nbsp;</p> <p>When it comes to the average non-investor, they are most likely 41 years old, 22 percent of them live in the Northeast, with a household income of up to BRL 3,600 and have studied until high school. Regarding employment conditions, 13 percent are freelance, 12 percent are unemployed, 9 percent are autonomous workers and 8 percent are informal workers. 

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MoneyOct 01, 2019

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BY Natália Tomé Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Most recently, worked as an Editor for Trading News, the information division from TradersClub investor community.