Here’s how to protect investments amid the war between Ukraine and Russia

THE Russia’s invasion of Ukraine shook the markets, with the world’s stock markets fluctuating and the dollar appreciating against several currencies, including the real. In a scenario of uncertainty, the attempt to protect the investments and heritage gains strength, but requires care.

Analysts heard by CNN Brasil Business point out that, although there are good options for protection assets on the market today, the ideal choice varies according to the investor’s profile and the portfolio of assets he currently has.

Investor protection assets

Sandra Blanco, chief strategist at Órama, says that the ideal is for every portfolio of variable income investments to have protective assets in its composition, those that tend to appreciate in scenarios of uncertainty or generalized decline, such as this week’s.

The two main protection assets on the market today are the gold it’s the dollartwo good options for those who invest in the so-called variable income, represented mainly by the stock market.

But if the investor is not in the variable income, buying gold and dollar can end up being a bad deal. Both assets are quite volatile, and in a “conservative” portfolio, that is, a fixed income portfolio, they can “do damage”, says Blanco, citing as an example the Intense fall of the dollar in the first weeks of 2022reaching 10% before the invasion of Ukraine.

For Ricardo Teixeira, coordinator of the MBA in Financial Management at FGV, the involvement of U.S in the Ukrainian crisis makes the dollar more volatile and sensitive to new developments in the conflict, favoring investment in gold as a “safe haven”.

He also recommends that equity investors look at the fixed income as a complement to the portfolio, especially considering the high remunerations in Brazil with the Selic rate by 10.75%.

It is also possible to look for other assets within the variable income. Patricia Palomo, asset manager and advisor to Planor, says that geopolitical instability tends to increase commodity prices, especially energy and metal. Thus, investments in them via thematic funds or ETFs are good options, as they also facilitate the withdrawal of the investment if the scenario changes.

At actions of sectors that are more resilient and less dependent on the external scenario are pointed out by Palomo as safer in this scenario. This is the case of energy transmission, banking, health and sanitation sectors.

“Investors who are insecure about the current scenario, but do not want to reduce exposure on the stock market, can choose to move between sectors and migrate to more resilient papers”, says Palomo.

Blanco also cites the companies linked to commodities as good options, in the case of oil and metallurgical companies.

Fixed income investors

If the portfolio is already conservative, based on fixed income, it is best to continue and expand these investments. Blanco sees fixed income in Brazil as “very inviting” at the moment, and believes it is a good time to increase exposure to it.

“For those who received money and want to invest, the scenario, considering Ukraine and the expected change in monetary policy in several countries, makes fixed income a much better option than variable income”, he says.

In the strategist’s view, the best thing at the moment are the bonds post-fixedsince the Selic tends to rise even more and, even if the inflation exceed expectations, there would still be a difference between the two and return on investment.

Even so, she recommends looking for good opportunities in fixed-rate bonds, which can offset the risk of inflation exceeding returns and bringing losses to investors.

Palomo also sees post-fixes with good eyes, and says that this type of investment should be helped with the scenario of higher global inflation due to the war in Ukrainewith interest rate hikes around the world that can reach Brazil.

“For those who prefer monetary protection, inflation-linked bonds offer a correction equivalent to the IPCA for the period plus an additional interest that can be quite significant depending on the asset’s term, but for that the investor needs to be willing to keep the investment until the end of the year. expiration,” he says.

Teixeira, on the other hand, considers that it is valid to prioritize investments with simpler application, facilitating entries and exits depending on the scenario, the case of the CBDCDI, LCA and LCI.

In case of Direct Treasurefixed-rate bonds are safer, as the yield is already known from the beginning, but there is a risk that inflation will exceed it.

“It is also important to look at liquidity. This is not the time to invest in long-term bonds, it is good to focus on the short term to change positions if necessary,” he says.

Time to withdraw investments?

Blanco says that, for a more daring investor, usually present in variable income, “you cannot assess the short-term return, you have to assess the scenario, wait for the dust to settle and make the necessary adjustments. You may be selling the asset for a price below the fair, this is the moment of caution, wait”.

In this sense, she considers that the Carnival holiday, which will leave the stock exchange closed for two days, may end up forcing investors to wait and think better about decisions.

For Teixeira, it is important that equity investors take into account the planning and choices they have made.

“Without a doubt, there are sectors that will hardly have a change of course in the predicted trajectory, and others may have. It depends on what you’ve drawn, for how long, the goals,” he says.

In his opinion, if the investor has already come close to what he expected to achieve and wants to protect his capital, it is worth considering leaving the investment, which is also valid for those who have just entered the stock market and are afraid.

“But if you have a coherent application plan, based on fundamentals you believe in, it’s not the time to leave, wait and see what will happen”, he says. The most important thing, according to him, is “to feel comfortable with the investment. If you don’t feel it, it might be better to undo it.”

Palomo also says that having a longer time horizon can be beneficial for investing in equities in a scenario of uncertainty like the current one, as they can be “good entry windows for the resource that needs to be allocated in portfolios that still have space for that kind of risk”.

“If the investor is invested and has this greater availability of term, he should not worry about reducing risk at this moment”, he evaluates.

See images of the Russian invasion of Ukraine