Are you thinking about invest part of your assets investing in funds in Brazil? Or you just want to buy Brazil MSCI index across EWZ from Black Rocks? Is it worth investing in funds in Brazil? Nowadays Brazil’s CAPE is the ninth cheapest in the world.
The Brazilian stock market is mostly bought and sold by foreigners through large banks and pension funds, but the single foreign individual has a very small share in this Brazilian. In this post, I will show you what options you have to invest in Brazil, what the expected returns are and how to operate here.
Some people maybe ask themselves if is it worth investing in funds in Brazil. Well if you’re not Brazilian you have the option to buy the MSCI index EWZ, an iShares ETF distributed by Black Rocks.
Well, this fund is a mess. Why? Not only because their returns cumulative in the last 10 years are just -1,82% you can see here:
MSCI Brazil Index it’s a really bad way to invest in Brazil. Their companies are very terrible, like Petrobras and Vale, two public companies from the corrupt government of Brazil, and this two has a great weight on the index. Vale works exporting Iron principally. Their fee of 0.63% it’s terrible too. Plus the bad news you have a lot of trash in this fund.
Brazil is an important global economy, we are the 6 biggest world economy and we still have a GREAT potential to grow up. Our economy is based on commodities, like iron, oil, meat, wheat, fruits and, soy. As Norway that has Statoil a great weight in their economy, we have Petrobras, only Petrobras worth 10% of our GDP.
If you want to see msci Brazil go to https://www.blackrock.com/investing/products/239612/
I saw in Interactive Brokers web site that you can’t buy individual stocks in Brazil from there. I think BOVESPA (our NYSE) don’t allow this, your only option outside EWZ or individual stocks is to buy ADRs on NYSE, but only a few Brazilian companies sell ADRs there. So what can you do? Maybe you can open an account in a Brazilian Brokerage like Rico or XP (the two biggest)
If you don’t want to try a pick stock in Brazil (I feel it’s perfectly easy) you can try to buy some funds sold by our brokerages. Let’s see some of them:
As you can see in the last right column their returns in the last 12 months.
Brazil has a great return last year and we saw a big appreciation of REAL (R$) against the U$ dollar.
I do a pick stock in Brazil, my returns last year was almost +27%.
“Ações” are pure stock fund.
“Multimercado”is stocks + fixed income
“Renda Fixa” is Fixed income.
In this table, we can see 13 stock funds. Only four performed better than me. Their fee’s pretty high as 2% per year. So I don’t have to pay this outrageous fee.
Additionally, you have to see wich is your tax planning accord with your home country, sometimes the tax burden will be very heavy to you.
Actually, our stock market is cheap, and have a great potential to grow up. We have little good companies to invest, almost 40 only, but investing here you can gain a lot more than buying an index or the expensive SP500.
So if you really consider investing in Brazil try to do a pick stock, serious. If you don’t have patient to do a pick stock in Brazil you can try some of this funds, but you have to open your account with a Brazilian Brokerage.
Let’s see these graphics:
In the first case, we buy U$ 1000 every month from this stocks or simple buy SP500, since from January 1990 until January 2017. Don’t think that I choose the biggest ten bags stocks to prove my point, these companies are regular companies in Brazil.
This content is from Bastter.com website, you can see all discussion here:
These returns are in U$.
CDI it’s the returns between banks loans.
SELIC it’s the returns that government pays to banks to borrow money from them.
Ibovespa is our SP500, IBOVESPA you will buy if you buy EWZ (actually you will buy MSCI index that is pretty like ibovespa).
All names with ON after are common stocks. As you can see SP500 have the poorest returns.
If you pay attention and do a good pick stock here, you can perform much better than SP500, furthermore with this expensive SP500 with a CAPE SCHILLER 30.
Brazil is currently with a 9.8 CAPE and a PB 1.6
The US is currently with a 26.4 CAPE and a PB 2.9
If you look here http://frugalsimple.net/howtousecape/ you will see that you can wait for returns below 7.6% annually in the next 10-15 years.
So, I mean with all these words, it’s time to invest in Brazil!
Thanks for having me,