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Have you opened your bank's investment app and come across these two types of investments and are unsure which one to choose? Here's a guide to help you decide which one is best for you, while you sip a cup of coffee.

What is CBD?

CDB is the Bank Deposit Certificate , a common investment in Brazil. Issued by banks, it works as a loan to the bank , with interest on maturity.

What is LCI?

The LCI (Real Estate Credit Letter) is also a bank paper . It is a fixed income security issued by financial institutions to raise funds for the real estate sector.

How to decide?

First, start by considering taxation on these investments . Whether you invest on behalf of an individual or legal entity will determine the IR. CDBs are taxed in both categories, while LCIs are exempt from income tax for individuals.

Secondly, it is crucial to weigh up the credit risk associated with the financial institution you are lending your money to. Although both products benefit from the protection of the Credit Guarantee Fund (FGC) , which covers investors in the event of bank default of up to R$250,000 , it is wise to remember that your money may not return to your account without you having a bad night's sleep. The trick here is to avoid headaches.

Thirdly, carefully consider the terms, as both investments have low liquidity, which means that the bank is not obliged to repurchase the securities . If you wish to redeem before maturity , you may incur losses in income. In many cases, it is best to hold the investment until maturity.

Fourth and last, see how much income these investments bring above investments that have daily liquidity (redemption). For example, if an investment that has daily liquidity is yielding more than investments that are redeemed only at maturity . Why bother?

In short, if you are an individual who plans to invest amounts below R$250 thousand, have found bank bonds from reputable banks , with yields higher than daily liquidity investments, and are willing to maintain the investment until maturity, LCIs are the most suitable choice. However, if you are a legal entity, plan to invest over R$250 thousand and face uncertainty in your cash flow, perhaps it is time to order another cup of coffee while you get in touch with me.