LCI and LCA are very popular investment options because they offer a fixed return. This means that when you make your investment, you can immediately know how much you’ll receive as a return on your investment.
However, many novice investors struggle to choose between these investment options, often becoming confused about which is the best option. With that in mind, we’ve created this article with a quick and simple explanation of LCI and LCA.
What Are Credit Bills?
LCI stands for Letra de Crédito Imobiliário (Real Estate Credit Bill). This type of investment works as a way to stimulate the real estate market. When an investor acquires an LCI bond, they are essentially lending money that will be injected into the real estate sector. In this case, the return rate is determined by a series of factors.
In comparison, LCA stands for Letra de Crédito do Agronegócio (Agribusiness Credit Bill). These bonds have a different purpose—here, the invested funds are used to support the agribusiness sector, and each bond offers a fixed return based on several relevant factors.
LCI or LCA: Which One Offers Better Returns?
When analyzing the returns of these bonds, we can clearly say that LCI and LCA are equivalent forms of investment, and choosing one over the other won’t necessarily result in better or worse outcomes.
To determine which bond will be more profitable, it’s important to consider several factors at the time of purchase. For example, both LCI and LCA tend to offer better returns the longer the term until maturity.
In other words, longer-term investments usually offer higher returns. In this case, it’s important to choose a bond with a duration that matches your financial plans so you don’t risk having your money locked in longer than you’d like.
What Are the Advantages of Investing in LCI or LCA?
There are many advantages to investing in fixed-income securities. To begin with, you’ll be able to quickly calculate the total value of your financial return right from the start. However, without a doubt, the biggest appeal of these two types of investments is the exemption from Income Tax.
Another positive aspect is that this type of investment—whether through LCI or LCA—is protected by the Credit Guarantee Fund (Fundo Garantidor de Créditos, or FGC). This means that even if the institution that issued the bonds goes bankrupt, the investor will still receive the full amount back, up to a limit of R$250,000.
How to Invest in LCI or LCA
This type of investment is usually very straightforward. You just need to contact your brokerage and ask for assistance from specialists to choose the bond that best suits your available capital as well as your investment goals—whether medium- or long-term.
One important point to remember is that LCI and LCA investments are not liquid. In other words, once the investment is made, you can only withdraw the funds at the end of the term defined by the bond. That’s why it’s essential to choose carefully before investing.
