Difference between Fixed and Variable Income

Fixed Income Vs. Variable Income

Fixed income and variable income are different concepts that you should know when making an investment. Fixed income is a debt issue issued by corporate entities with high financial capacity with a defined amount, variable income in turn, does not express the amount to be received in case of investing in it, nor does it ensure a profit or benefit over time.

Understanding the difference between fixed income and variable income is one of the most common doubts among investors, especially for those who are taking their first steps in investing.

In general, fixed income is the investment that allows predictability of earnings, because the interest rate is fixed, while variable income has unpredictable returns, since prices fluctuate according to the agents’ mood, influenced by economic factors. and politicians.

It doesn’t matter if you want to learn how to invest in the stock market , or are more conservative and have no plans to start investing in variable income: you need to understand these two modalities to build a profitable portfolio with the correct exposure to risks.

In addition, understanding the differences between fixed income and equity will ensure that you become a better and more informed investor about your investment options.

Difference between Fixed and Variable IncomeWhat is fixed income?

To begin to understand the difference between fixed income and variable income , let’s start with the simplest, fixed income.

Fixed income is the application where you know how your remuneration will be calculated at the time of contribution.

This is because these types of products have pre-established maturity dates and a profitability index , which can be a specific interest rate, the Selic rate or the IPCA .

But how do these investments work in practice?

In fixed income, you lend money to the government or a financial institution. In exchange, she will return this amount with interest, as long as you leave your amount invested until the due date.

Understand what types of fixed income you can invest in:

Fixed income types

The financial market offers several options for fixed income investments , separated into two large groups: public and private  bonds .


Public bonds are those issued by the National Treasury and used to raise funds.

This money can be used to finance Brazilian public debt or for government investments and projects, such as spending on health and education.

Fixed -income government bonds are:

  • Prefixed treasure;
  • Fixed-rate Treasury bonds with semiannual interest;
  • Treasury IPCA + with semiannual interest
  • Selic Treasure .

To start investing in these bonds, you need to choose a broker and open your account, or invest directly through Treasury Direct, the National Treasury’s platform to trade government bonds directly.

It is also important to keep an eye on taxation. The IOF is only charged if the money is applied for less than 30 days, while the Income Tax follows the regressive rule, that is: the longer the money is applied, the lower the rate – it starts at 22.5% for 180 days and goes up to 15% for income over 720 days.


Private fixed -income securities are issued by private companies or banks.

The logic is the same: you lend money and receive interest as income. You can also find private fixed income bonds under the name of private credit.

In this group, they are separated into two categories: bank and corporate bonds. Banking, as the name implies, are issued by banks. Are they:

  • Bank Deposit Certificate ( CDB );
  • Mortgage Letter of Credit (LCI);
  • Letter of Credit for Agribusiness (LCA);
  • Bank Deposit Receipt (RDB);
  • Guaranteed Real Estate Bill (LIG).

Fixed-income corporate bonds are issued by private companies so that they can invest and finance their projects.

They typically have longer expiry dates, but that can mean higher returns. Your options are:

  • Debentures;
  • Incentive debentures (infrastructure projects for public utility);
  • Certificate of Real Estate Receivables (CRA);
  • Agribusiness Receivables Certificate (CRA);
  • Private credit funds.

When we talk about indexes and indexers, there are two that you should always keep in mind:

  • CDI : tends to approach the Selic and is used as a profitability benchmark;
  • IPCA: measures inflation and shows price changes for consumers. For there to be a real gain, it is necessary to exceed the IPCA.

What is variable income?

The difference between fixed income and variable income will become clearer to you now. Variable income, as the name implies, does not predict income at the time of application, that is, you will not know how much you will receive in the future, and you may even lose money.

This happens because these products are linked to assets that show many fluctuations, as they are priced according to the law of supply and demand.

Think, for example, of a stock: the price varies according to investors’ interest in the asset. When there are more people selling, the price goes down. When there are more people buying, the price goes up. That simple.

The problem is that investors’ mood for each stock is influenced by thousands of factors, such as the national and international political scenario, the economic situation, inflation , interest rates and even the exchange rate.

However, in the financial market, the greater the risks to which the investor is exposed, the greater the potential for long-term returns.

Variable income types

The types of equity investments are:

  • Actions;
  • Equity funds;
  • Equity fund ;
  • Derivatives;
  • Futures contracts;
  • Exchange;
  • Options market;
  • Commodities;
  • real estate funds;
  • Agricultural products;
  • Exchange Traded Fund, or index funds (ETF).

With regard to indicators, the Ibovespa Index is the most relevant. The mission of the vast majority of equity funds is to surpass this index, which is used as an average representation of the most traded shares on the Stock Exchange.

Before continuing, it is important to demystify that it takes a lot of money to invest in variable income. At Warren, you have access to equity funds by investing just BRL 100 in the platform. This means that it is possible to invest with little money and still have good returns.

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Difference between Fixed and Variable IncomeDifference between fixed income and variable income

First of all, it is necessary to keep in mind that the differences between fixed income and variable income are not necessarily advantages or disadvantages.

In general, variable income has greater long-term profitability potential, but that does not mean that fixed income is bad or cannot be part of your portfolio.

On the contrary: the experts’ recommendation is to build a portfolio with diversification between different assets, because this reduces the specific risk of each one of them.

All your choices must revolve around your goals and your investor profile .

Here’s a comparison of the main differences between fixed income and variable income:

Fixed income Variable income 
Greater return predictability Impossible to predict profitability
Low exposure to risk Greater exposure to risks
Simpler applications More complex investments
Lower return potential Greater return potential

As we will see, this is an eternal tug of war when we look at the difference between fixed and variable income: the relationship between risk and return .

It is up to the investor — or manager, in Warren’s case — to make an asset allocation that finds the best of both worlds. We will see more details below.


Fixed income profitability can be fixed-rate and floating-rate.

In the first option, your remuneration is fixed. An example: if it is agreed that you will receive 5% annual interest, that percentage remains until the bond’s maturity date.

In the floating rate modality , profitability is linked to an index, which can be the Selic, CDI or IPCA. When these indices go up, your return also goes up. When they fall, income follows.

In this case, you cannot know, at the time of investment, how much you will receive at the end of the term, but you can be sure that the index will be monitored. In the case of IPCA-indexed securities, for example, you guarantee that you will maintain purchasing power, because the return will always be higher than inflation.

In variable income , the long-term profitability tends to be higher, because there are more risks involved. At the same time, in the short term, you could end up losing money because it is a volatile market where prices fluctuate every day and are heavily impacted by the mood of investors.


Fixed income is usually seen as guaranteed profitability, as it can be estimated. But, although it is very rare, one cannot ignore the possibility of private bonds defaulting.

Therefore, it is essential to choose companies with a good track record. Government bonds are considered low-risk investments , as the Government is the most solid institution in any country.

However, to avoid this loss, fixed income bank securities are covered by the Credit Guarantee Fund. If the issuer declares bankruptcy, you get your money back, up to R$250,000 .

In variable income, in addition to credit risk, you also need to consider market risk. It involves fluctuations in supply and demand and this changes the indicators linked to your investment, such as stock prices and interest rates. Surely you have heard on the news about the fall of the Stock Exchange due to some political event, for example.

This is a risk that cannot be predicted. Still following the example of investing in stocks, there are no guarantees of positive performance. Therefore, we always reinforce the importance of diversification. When one asset doesn’t do well, the other works as a protection for your money .


Volatility is the fluctuations of investments. The more changes it undergoes, the more volatile it is. This is a characteristic of variable income and much talked about on the Stock Exchange.

As a rule, the more volatility an application presents, the greater the risks. In fixed income, this is not very expressive and rarely affects your income.


Liquidity is the speed at which you can turn your investment into cash.

At the time of redemption of your earnings, liquidity is measured through the period in which the money falls into your account. For example, applications D+1 (amount available in the account one business day after the order) have more liquidity than those D+17.

As for time, a short-term asset has more liquidity than long-term ones, but the long-term profitability is higher. However, it is important to note that liquidity is a factor that varies greatly depending on the product you invest in. Therefore, you need to evaluate each case.

Fixed income or variable income: how to choose

As we said, although there are differences between fixed income and variable income, this does not mean that one is worse than the other. The choice will always depend on your objectives with the application (whether it is an emergency or retirement reserve, for example), the term and your investor profile .

Before anything else, always consider the investment tripod . It is formed by profitability, liquidity and security.

In general, investments have two of these characteristics, not all three.

Safe investments with good liquidity will not have a good return.

If you choose investments with good liquidity and profitability, you will be more exposed to risks.

Fixed income is liquid and safe, but the profitability is lower, while variable income can offer better yields and liquidity, but it is not as safe as fixed income.

Confused and don’t know where to start? The secret lies in diversification and finding the ideal balance for each asset in your portfolio.

We list what you need to consider when making your contributions.

Investor profile

Are you new to investing? Are you conservative and not willing to take risks?

The first thing that needs to be defined when investing is your profile, because from there you will be able to eliminate applications that do not serve you.

Usually, fixed income is part of the choices of beginners and conservatives, since the contribution is very simple and there will be no risk of losses. But it also has space in the wallet of the most experienced, as protection.

If you have knowledge of the financial market and intend to take some risks in search of better profitability, allocating a higher percentage of your portfolio in variable income may be interesting, since the possibility of return is more attractive, but the risks are higher.

Deadlines and objectives

Fixed income is best suited for goals that can be achieved in an average of three years, such as an emergency fund .

Variable income, on the other hand, fits objectives with more than six years. Even because short-term variable income has even more risks, given the volatility of the market in shorter periods.

One of the common mistakes of those who are starting in the financial market is the idea of ​​making quick money. The focus, in our view, should be on the long term , because that’s where compound interest makes a difference. When it comes to actions, this is even more important.

Do you know how much we hear great investors and entrepreneurs saying that time is money? That’s also what it’s about. The longer your capital is invested, the better results you will get — and this is one of the biggest rules you need to understand.


Diversifying your portfolio is always the best alternative.

With short, medium and long-term products, you can adapt your portfolio to your goals, increase your equity and protect your money at the same time.

We always emphasize that it is not a matter of choosing between fixed income and variable income , but of adjusting the percentages of the two options to what makes the most sense for your goals.

At Warren, you can count on Suitability , a test that uses artificial intelligence to understand your profile and goals. In this way, we are able to suggest an optimal allocation that respects your risk profile and puts the risks in your favor.

This gives you access to a complete and diversified portfolio, in a service that was previously only accessible to the ultra-rich.

And best of all: we charge no administration or performance fees.

As we have seen, the difference between fixed income and variable income is basically in relation to the estimate of earnings and security. However, it is not a matter of choosing between one or the other, but of putting together a portfolio that takes the best performance from both products.

So you can align your investments to your goals and still protect your money.

Key differences between fixed income and variable income

  • Fixed income is a type of debt that a financial institution acquires with the sale of bonds at a fixed interest and return. The lender is an investor who offers his money in exchange for the bond and its benefits.
  • Equity is an investment that is made up of a company’s assets. They are usually shares and their profitability will depend on how well the company does in its business.
  • Fixed income ensures the return of the money to the investor and ensures its profitability.
  • Variable income can generate higher profits, but it is a high-risk investment that does not return the investment or ensure its profitability if the business or the market goes bad.

What is the best way to invest?

This will depend on the type of investor we are . If we are conservative, obviously fixed income will be the best option. Since at all times we will know the operation and position of our money, knowing exactly when we will recover it in full and with what exact benefits. And if, on the other hand, we are very risky, equities may be more attractive. Since if everything goes as expected, we will recover the investment and the benefits will be much higher.

Even so, there is a middle ground that is often put into practice a lot and is highly recommended for investors with a moderate profile. Which consists of the combination of both investment systems, distributing the amount of money in different fixed income and variable income products . In this way, in the event that the investments made in variable income were negative, they would be compensated or the loss would not be so noticeable thanks to the fixed income in which it has also been invested. Preserving, in the worst case, the full capital of the fixed income plus profits and, in the best, the total capital invested in both plus the interest percentages obtained.

If you have savings and want to invest them to get more returns, the first thing you should do is assess the type of investor you are . If you prefer to take less risk, and get less return, with fixed income , or vice versa, with variable income. And, once decided, find the products that generate more confidence for your investment.

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