VIVER DE RENDA só com ETFs: o passo a passo DEFINITIVO | Usufruto sem FIIs e dividendos

0:00I'm going to live off my earnings by

0:02investing only in accumulating ETFs .

0:04That's exactly what you heard . No real

0:06estate funds , no stocks , no dividends ,

0:08none of that . Most people on the

0:11internet have taught you that the only

0:13way to live off earnings is through

0:15dividends . And in this video , I'll show

0:18you another much simpler way that can

0:20even outperform the dividend strategy .

0:23So stay until the end because this is

0:25the most important video I've ever made

0:26on this channel . So leave a like and

0:28don't forget to subscribe to the

0:30channel so you don't miss videos that

0:31go against conventional investment

0:33wisdom . Hi , I'm Lorena , a

0:35BIMA-certified investment specialist ,

0:37and I'm finally going to explain how to

0:39live off investments using only

0:41accumulating ETFs , even considering

0:43pessimistic , catastrophic scenarios and

0:45sequence risk . There is a misconception

0:49that stocks and real estate funds that

0:51pay dividends are inherently safer or

0:54better than assets that don't

0:55distribute profits . In practice , when a

0:59company pays a dividend , the price of

1:01the share or stock drops proportionally

1:03to the amount paid . So , this money

1:06doesn't appear out of thin air ; it just

1:08moves from your right pocket , the asset

1:10price , to your left pocket , your

1:12account , without generating any

1:14additional wealth . I have a complete

1:16video talking just about this . I'll

1:17leave it here or in the video

1:19description . And to exemplify this , I

1:21brought an illustrative example . So , in

1:23this example , we have assets A , B , and

1:25C. Asset A pays a lot of dividends ,

1:27there is some potential appreciation ,

1:29but it's not the biggest part of the

1:31return . Asset B pays some dividends ,

1:33but it's the appreciation that does

1:36most of the heavy lifting . And asset C

1:39is an accumulation asset , so no type of

1:41dividend or income is paid out . So , the

1:44value is reinvested into itself , either

1:46within the company or by purchasing

1:48more shares internally . In all cases ,

1:51an investment of R $ 10,000 had a

1:53return of R $ 16,000 . It doesn't matter

1:56if it came from dividends or not . The

1:58difference here is that dividends are a

2:00portion sold automatically that lands

2:01in your account , but you can reinvest

2:03them or sell a part of your position ,

2:05which in the end amounts to the same

2:06thing . And we'll see an example with

2:08taxes and everything right now . Stay

2:09tuned . But many people get confused ,

2:11thinking that receiving dividends is

2:13receiving extra money . The problem is

2:16bigger when it becomes a selection

2:17criterion , because companies that

2:19distribute high dividends may be

2:20investing little in their own business ,

2:22which ends up affecting the company's

2:24own growth . And the investor might end

2:26up losing out in the long run if they

2:28don't reinvest those dividends . What

2:30really matters is the total return ,

2:32which is the dividend plus the

2:33appreciation , not just how much lands

2:35in your account every month . So ,

2:37exploring this example further , this is

2:39typically how these assets behave . It's

2:42not a rule , but it's more or less like

2:43this . Funds are required to distribute

2:45quite a lot in dividends . Stocks , on

2:48the other hand , distribute dividends ,

2:49but some appreciation is still expected

2:51, since the company needs to reinvest

2:53in itself . And many ETFs are

2:55accumulation ETFs , meaning that even

2:57the ETFs that pay dividends take those

3:00dividends and reinvest them

3:01automatically within the ETF itself .

3:04Again , it's not a rule , but it is the

3:05most common practice . What I'm trying

3:07to say is that there is no difference

3:08whether the value comes from a dividend

3:10or from appreciation . You can just sell

3:12a little bit of that appreciation and

3:14it amounts to the same thing . But I

3:16know what you're thinking : if I sell a

3:17portion of my shares every month ,

3:19eventually my shares will run out .

3:21Relax , that's not going to happen . In a

3:23good ETF , in the long run , the shares

3:26will increase in value , even if they

3:28fluctuate in the short term . And when

3:31that value gets too high , what ends up

3:33happening is a split . And a split is a

3:37process that happens when the share

3:39price gets too high . So the managers

3:41slice those shares into smaller

3:43portions . I even have an example here

3:46to show you , which is the SPXS ETF , a

3:49dollar-denominated ETF . A single share

3:52reached a value of 6,700 dollars . To

3:54make it easier to buy and sell , since

3:56not everyone has 6,700 to put into an

3:59ETF . So they performed a 1 - for - 100

4:01split . So , anyone who had two shares of

4:05SPXS on December 12th woke up on

4:07December 13th with 200 shares , only

4:09each one worth 67 . Just a quick note

4:13that all the charts I'm using here ,

4:15such as from Investidor 10 or

4:16TradingView , adjust the chart

4:18retroactively . So you don't see a jump

4:21from 6,700 to 67 . In this example , they

4:23divide the chart by 100 so that the

4:25graph remains continuous . In other

4:27words , if you were thinking of selling

4:29a share to get about 3,000 something

4:31reais , with this split , you'll now have

4:34to sell 100 shares or 90 , whatever . But

4:36the point is that even if you sell

4:38these shares , your share count won't

4:40reach zero , provided , of course , that

4:42the asset continues to appreciate .

4:43Another alternative with splits is

4:46making sales and purchases in decimal

4:48amounts . Outside of Brazil , for example

4:50, you can buy 0.05 % of an ETF share . But

4:55let's be clear again that what really

4:57matters is the total return on

4:59investments . So , we're now going to see

5:01a simulation of usufruct using only

5:03ETFs and then compare it with dividends

5:04. So I'm going to use Marcia's example

5:06here . Marcia earned 2,920 reais a month

5:09and invested 1/4 of that salary , which

5:12was about 730 reais into investments .

5:15She kept investing 25 % over 20 years ,

5:17adjusting her salary for inflation , of

5:19course . After 20 years , Marcia managed

5:22to accumulate a net worth of 960,000

5:25reais , investing , of course , in good

5:27ETFs , averaging 13 % per year . And this

5:30premise is important because this

5:32appreciation will be used for the ETF

5:34tax calculation . So , 20 years have

5:36passed , Marcia is looking wonderful ,

5:38she told her boss where to go , and now

5:40she'll live only on the ETF returns . So

5:42, let's see in practice what her

5:44portfolio is like and how much she will

5:46be able to spend every month . So , these

5:48960,000 reais were divided into four

5:50ETFs . ETF A and B , which are in fixed

5:53income , for example . ETF C , an emerging

5:55market index like Brazil , and ETF D ,

5:57which is a global ETF or something

5:59similar . The focus here is to explain

6:01more about how to live off the

6:03appreciation , not to deeply explain the

6:04asset allocation strategy . But if you

6:06want to know exactly which ETFs are in

6:08Marcia's portfolio , watch the video

6:10carefully , because I will reveal the

6:12true ETFs somewhere in this video . It

6:14will be almost like an easter egg for

6:16those who pay attention . So , we're

6:17going to look at these values over 15

6:19years . So , imagine that these values

6:21are from 2011 , and we'll look at

6:22inflation as well , don't worry . So ,

6:24let's look at Marcia's first year of

6:26usufruct . Marcia decided she will

6:28withdraw 5 % in the first year . This is

6:30called the withdrawal rate or

6:32redemption rate . So , 5 % of 960,000 is

6:3548,000 BRL . Then she sells a little bit

6:39of each ETF , 1.25 % to be more exact . So

6:42if she has 1,000 shares of each ETF ,

6:44she sells more or less 12 to 13 shares

6:47per ETF . When Marcia sells these ETFs ,

6:49she has to pay a 15 % tax on the

6:51appreciation , but it's on the

6:53appreciation , on the profit , not on the

6:55total amount . With that , she has 42,675

6:58BRL net to use for the whole year . This

7:01money goes , for example , into a daily

7:03liquidity CDB account , earning 100 % of

7:05the CDI . So this is the amount that

7:07Marcia will use throughout the year . So

7:09right away , we can divide this amount

7:11by 12 months to get an idea of how much

7:13Marcia will spend every month . I'm also

7:15representing it with colors so we can

7:17remember which ETF was sold to obtain

7:19this money . But we'll see the

7:20importance of this in a little while .

7:22And the cool thing about this example

7:23is that while Marcia is spending money

7:25in January , the amount for the

7:26following months is earning CDI . So ,

7:28when February arrives , the 3,556 have

7:32already turned into 3,591 and so on .

7:34And the value for December will have

7:36become almost 4,000 BRL . So , on average

7:38in the middle of the year , Marcia will

7:40be able to use more or less 3,770 BRL

7:42per month . In 2011 , not bad at all . Now

7:45imagine that we have already reached

7:46the second year . We reached January of

7:48the following year , year two of the

7:50usufruct , considering that her assets

7:52yielded 13 % per year . So now Marcia

7:54already has 1,030,000 BRL . Very good ,

7:57right ? Success . So this means that even

7:59selling 5 % of her assets , it's no longer

8:02the 42,000 BRL from last year , but

8:04rather 45,812 BRL , already deducting

8:08the taxes on the ETF . But then , which

8:10ETF to sell ? This sale that Marcia made

8:13is based on the allocation strategy she

8:15set up . In this example , her strategy

8:18is to have 25 % in each ETF . So , the ETF

8:21that is above 25 % is precisely the ETF

8:23that she will sell proportionally . So ,

8:26in this case , ETF A and ETF D grew too

8:28much . Therefore , last year's budget

8:31came precisely from these ETFs that

8:32appreciated the most , as we can see in

8:34the colors here . And this simple rule

8:36does two things . First , it keeps

8:38Marcia's portfolio balanced . And the

8:41second is selling high , since she will

8:42always sell the ETFs that have risen

8:44the most . And the market is cyclical .

8:46Normally , when the Brazilian market

8:48falls , the international market is

8:49rising . When the international market

8:51is down , the Brazilian market and

8:53emerging countries are up . So Márcia ,

8:56for example , can sell fixed-income ETFs

8:58if , by any chance , variable-income ETFs

9:00are a bit low during those leaner times

9:02, you know . And by following this plan

9:05in a relatively simple way , Márcia

9:07will always end up selling high . So , on

9:09average , in the second year , Márcia

9:11will be able to spend R $ 4,047 per

9:13month , which is more than the previous

9:15year , which is excellent . Continuing ,

9:17let's assume we reach January of the

9:19following year , which is Márcia's

9:21third year of enjoying her portfolio ,

9:23yielding 13 % per year . Now Márcia has R

9:25$ 1,116,000 . This means that with a 5 %

9:29withdrawal rate , Márcia will have R $

9:3249,000 after taxes on the ETFs . But

9:35which ETF will she sell ? This year , the

9:37ETF-D performed better than the others .

9:39So , most of her sales will be precisely

9:41from this ETF so she can keep her

9:43portfolio balanced , which in this case

9:45is 25 % of each ETF . So , perfect . Márcia

9:48is selling ETF-D while it is high again

9:50, which is the famous " buy low , sell

9:52high . " Now let's move on to the fourth

9:54year of Márcia's enjoyment . Here ,

9:56ETF-D performed poorly ; it plummeted .

9:59On the other hand , ETF-C rose

10:01significantly . Let's say ETF-C is made

10:03up of Brazilian companies , you know ,

10:05emerging markets . And this happens , as

10:07I mentioned before , due to market

10:08cycles . So now Márcia's assets are

10:10already at R $ 1,187,000 , even while

10:14selling 5 % and enjoying it every year .

10:16And which ETF will she sell ? This year ,

10:19ETF-C performed much better . So the

10:22bulk of the sale will come from this

10:24ETF , precisely to keep her portfolio

10:26balanced with 25 % in each ETF . So ,

10:28perfect . Márcia is selling ETF-C

10:30because she is taking advantage of it

10:32being high . As for ETF-D in the

10:34portfolio , it doesn't even need to be

10:36sold so that it stays close to the 25 %

10:38allocation . So , on average , in the

10:40fourth year , Márcia will be able to

10:41spend R $ 4,630 per month , which is

10:45wonderful , because the infinite money

10:47from her enjoyment has been increasing

10:49over the years . So , when we look here

10:52at the first 15 years of withdrawals ,

10:53considering all these premises below ,

10:55we can see that Márcia is living off

10:57her ETFs . And I included a dedicated

11:00column for income taxes on her sales ,

11:01based on the total interest from the 20

11:03years of accumulation . And it is

11:06interesting to note how both the equity

11:08and the withdrawal amount increased

11:10over time , even while making 5 % sales .

11:14That is the magic of living off ETFs . I

11:16included an example using some colors

11:18here to show the sales that came from

11:20the ETFs that were above the target

11:22percentages . And of course , as I said ,

11:25there are market cycles , and it's

11:27natural for a proper strategy , even if

11:29it's simple , to ensure that sales come

11:31mainly from the top-performing ETFs . So

11:35, in this example , we had several years

11:37where ETF C , in yellow , accounted for

11:39the bulk of the sales , but a few years

11:41later it was ETF D , the purple one , and

11:43that is normal . So , in Márcia's case ,

11:46this allocation strategy with defined

11:48percentages ensured she always sold at

11:50the high . But I know what you're

11:53thinking , Lorena , I'm still not

11:54convinced , because I don't think you're

11:56taking something very important into

11:57account , which is inflation . But I

12:00already knew you were thinking about

12:01that . So , if you're like me , come on ,

12:03let's put our glasses on , because there

12:05are a lot of numbers here for us to go

12:06through . So I brought 30 years here ,

12:09and on the right side , a table with the

12:11initial values adjusted for inflation .

12:13With this table on the right , we can

12:15see what the proportional purchasing

12:17power value would be from year one . For

12:20example , after 24 years living off her

12:22income , Márcia is already withdrawing

12:24R $ 20,000 , selling her ETFs , while

12:26just adjusting for inflation , that

12:28withdrawal should be R $ 10,000 . In

12:30other words , with these premises , she

12:32has already managed to double her

12:33purchasing power . Isn't that wonderful ?

12:35Imagine having a retirement like that .

12:37Furthermore , her equity has already

12:39reached 5 million versus the 2.7

12:41million it should be if it were just

12:43adjusted for inflation . So , take this

12:46moment , pause the video , put it on your

12:48TV so you can see all these numbers

12:49clearly . Pay attention also to the

12:52premises below , as they will provide a

12:53good breakdown of this table . But I

12:55know there's also something else you're

12:58thinking , that 13 % is a very optimistic

13:00return . Life isn't always easy , so what

13:02if inflation skyrockets ? Yeah , that's

13:03definitely something to think about .

13:06However , 13 % per year with good ETFs ,

13:08obviously thinking long-term , isn't

13:10even that exaggerated , but it is

13:12thinking of a very simplified scenario .

13:15In practice , returns will fluctuate

13:17over the years . Everything isn't always

13:19sunshine and rainbows . So , let's do the

13:21following : let's modify the premises a

13:22bit for a more pessimistic scenario .

13:25I'll reduce it to 11.5 % annual return

13:27with 5.5 % annual inflation , which is

13:29more than we've had in the last 10

13:31years , considering we had COVID , among

13:33other disasters . With this , the

13:37withdrawals remain above inflation and

13:39the assets continue growing above

13:41inflation . If we look at year 24 now ,

13:44we have 15,000 per month with

13:45purchasing power a bit above the 13,000

13:47just adjusted by inflation . Remembering

13:50that in this simulation , Marcia started

13:52living off her investments back in 2011

13:54. So , row 10 here represents today's

13:57values . Another point we have to take

13:59into consideration is that we are using

14:01a 5 % withdrawal rate . I could make an

14:04entire video just about withdrawal

14:06rates , but in short , the ideal number

14:08is between 4 and 4.5 % . And this number

14:11can be adjusted over time . So , in a

14:13worse year , it would be smarter to

14:15reduce this amount . This way , Marcia

14:18can cushion the inflation and ensure

14:20that the withdrawal figures remain

14:22healthy over time . Well , folks ,

14:24basically that's how someone lives off

14:27income from ETFs . So , in short ,

14:29everything revolves around this

14:31withdrawal rate or redemption rate ,

14:32which is nothing more than selling a

14:34portion of your ETFs . And ideally , the

14:37sale should be made from those ETFs

14:39that are at percentages above the

14:41target . And both diversification and

14:44rebalancing are much easier when you

14:46have a portfolio with a few ETFs than

14:48if you have 20 stocks , 30 REITs , and

14:49who knows how many other assets

14:51scattered there . Well , after everything

14:54I've shown you , if you're still not

14:56convinced , you're still wondering : " Man

14:58, but I still think you can live off

15:00dividends . Dividends are still the best

15:02strategy . Nothing convinces me

15:04otherwise . So what did I do ? I took the

15:06last 15 years of Banco do Brasil , a

15:09favorite stock for dividend lovers , an

15:11unbreakable bank , all that stuff . But

15:14over the last 15 years , Banco do Brasil

15:16had a total return , including dividends

15:19, of 8.93 % per year . So , if we put Banco

15:23do Brasil into this premise , but with a

15:255 % withdrawal rate and paying zero tax

15:27on dividends and share sales , the

15:29monthly drawdown literally loses to

15:31inflation . So , in year 15 , Marcia's

15:34drawdown would be R $ 6,800 , well below

15:37the almost R $ 9,000 of the

15:39inflation-adjusted drawdown . And the

15:41interesting thing is that since the tax

15:43here is zero , the monthly drawdown in

15:45the first few years is actually more

15:47attractive . However , over the years ,

15:49this amount starts to lag behind this

15:51pessimistic 5.5 % inflation . And of

15:54course , this is a simplified

15:55calculation , especially since I

15:56interpolated the value up to year 15 .

15:59And in reality , between years 1 and 15 ,

16:01they would fluctuate and be much more

16:02volatile . But year 15 does represent ,

16:05quite accurately , what would have

16:07happened . But what if , instead of using

16:09a 5.5 % withdrawal rate , you simply use

16:12100 % of Banco do Brasil's dividends ?

16:14Wouldn't that be easier ? In the last 15

16:16years , we've had a dividend yield of

16:185.66 % per year . We can arrive at this

16:20figure by subtracting the share

16:22appreciation from the total return .

16:24However , using 100 % of the dividends in

16:26this case , for Banco do Brasil , would

16:29be equivalent to a withdrawal rate of

16:315.66 % per year , which would result in a

16:33slightly higher monthly drawdown , since

16:35we wouldn't be reinvesting the

16:37dividends . However , it would erode

16:40purchasing power even faster , because

16:41look : in 15 years , the assets and the

16:43value of the monthly drawdown are

16:45already well below the

16:46inflation-adjusted figures . In other

16:48words , the math won't add up at the end

16:50of the month ; you'll have to tighten

16:51your budget . So , those who sell the

16:53dividend idea heavily rarely show what

16:55happens if you use the entire dividend

16:57yield ; it's very easy to say , " Oh , I'm

17:00receiving X in dividends . " Because it's

17:02easy to understand and sell courses ,

17:04but in practice , if you use all those

17:05dividends that hit your account , you

17:07will erode your purchasing power . And

17:09finally , to provide another example , I

17:12also brought the beloved HGLG11 , a real

17:14estate fund considered good by most

17:16people . Again , with a 5 % withdrawal rate

17:19and returns based on the last 15 years ,

17:21adjusting for a pessimistic annual

17:23inflation of 5.5 % , even paying zero tax

17:26on dividends over 15 years , the monthly

17:29purchasing power would have decreased

17:31to 6,500 against 8,900 from inflation .

17:34And obviously , folks , this is just an

17:35example ; no one is going to retire with

17:37only one asset in their portfolio , just

17:39Banco do Brasil or just HGLG . It is

17:41obvious that we need to diversify . My

17:44point with these examples is just to

17:45show that even if you have the best

17:47assets in your portfolio , they won't

17:48send your returns to the moon . Your

17:50portfolio will be the average of your

17:53assets , and individually , both Banco do

17:55Brasil and HGLG are good assets . So

17:58there is a high chance that portfolios

17:59with individual stocks and real estate

18:01funds will have these two assets in the

18:03portfolio , as well as worse stocks and

18:04funds . And everything I showed here are

18:07just simulations and models based on

18:08the premises that were on the screen .

18:10And it's always very important to

18:12remember that past performance is not a

18:13guarantee of future results . And the

18:16main goal of this video is more to give

18:17you an idea of how it is possible to

18:19live off ETF returns . Now I want to

18:21bring you some very important

18:22information . In all the examples we saw

18:25here , including the pessimistic ones ,

18:27we were considering a simple linear

18:29return . And we were optimistic even

18:31with Banco do Brasil and HGLG11 , for

18:33example . And in the real world ,

18:34investments in variable income are not

18:36linear . Variable income fluctuates a

18:39lot , and even when it goes up , it goes

18:40up while falling . And although the

18:43average return in this example of

18:45Marcia's was 13 % per year , with

18:47real-world variable income , there will

18:49be years with 20 % returns , while at the

18:51same time , other years her portfolio

18:53might see a negative 20 % return . And

18:56this is called volatility . And

18:58volatility brings something called

19:00sequence risk . Back when Marcia put her

19:03portfolio together , I mentioned that

19:05ETF C and ETF D were variable income .

19:07And this is a very important point . So

19:09let's look at some examples of the real

19:10behavior of variable income . For

19:12example , if we look here at Banco do

19:14Brasil , we had a sharp drop here ; this

19:16chart already includes reinvested

19:18dividends , and even so , we had a sharp

19:2029 % drop in a 1 - year window . Klabin ,

19:23which is a stock many people have in

19:25their portfolios , even with dividends ,

19:27also saw a 26 % drop within a one-year

19:28window . And real estate funds don't

19:31escape this either . Looking at HGRE11 ,

19:33which is also a real estate fund that

19:35many people like , we had a 7.8 % drop

19:37even while reinvesting dividends . And

19:39without reinvesting those dividends , it

19:41reached minus 15 % . Now , Itaú stock ,

19:43which is a stock that looking through

19:45the rearview mirror has performed very

19:47well , right ? But it also had a one-year

19:49window with minus 40 % , even when

19:51reinvesting dividends . So , just to

19:53exemplify here , if the investor

19:55couldn't handle the pressure of

19:57continuing to reinvest dividends , that

19:59same drop would represent -43 % . So

20:03imagine the pain of seeing almost half

20:05of your net worth cut in half and you

20:06still have to keep reinvesting

20:08dividends into an asset that is falling

20:09. Imagine if we look at an ETF of

20:12dividend-paying companies here ; even

20:13with the diversification of ETFs , there

20:15is also a bad window here that reached

20:17minus 21 % . If we look at examples of a

20:21global ETF equivalent to WRLD11 or VOO ,

20:23we have one-year windows falling by

20:25about 23 % . So , all these drops that I

20:29showed you here have a name , and we

20:30call them drawdowns . And they are part

20:33of the life of anyone who invests in

20:34variable income . And as we saw here in

20:36the examples , it's not the dividend

20:38that will save you from these drawdowns

20:40. Despite being scary , there is one

20:42thing in common that happened here ,

20:43which is that all the assets recovered

20:45after some time . Banco do Brasil hasn't

20:47recovered yet , but it may be that in a

20:49few years , in about 3 or 4 years , it

20:51might return to normal . So , considering

20:53these drawdowns in variable income ,

20:55they can affect your enjoyment of

20:56assets in different ways . So , for

20:59example , in a hypothetical situation

21:01where there was a -24 % drop at the

21:03beginning of the withdrawal phase , this

21:05would certainly negatively affect the

21:07monthly income . The average annual

21:09return continues to be 13 % per year ,

21:11with very good years and other very bad

21:13years . And what happens is that with a

21:15fixed withdrawal rate of 5 % , the

21:17monthly income stays below inflation .

21:20So , Marcia's quality of life will drop

21:22and the numbers won't add up . Marcia

21:25would then have to increase that

21:26withdrawal rate that year to be able to

21:28maintain her inflation-adjusted

21:30purchasing power , at the risk of

21:31depleting her assets . In this

21:33simulation here , Marcia's net worth

21:35struggled to keep up with inflation

21:36until year 23 . And that is quite

21:38dangerous . If we look here at Marcia's

21:41net worth in year eight , for example ,

21:43she is in some danger , because high

21:44withdrawal rates are very risky . And so

21:47no one can say I only brought good

21:49examples , let's look at this doomsday

21:51scenario , where even with a 13 % average

21:53annual return , all the bad years are

21:55grouped right at the beginning of the

21:57period . Here , Marcia's money runs out

22:00in year 12 . This is a catastrophic

22:02scenario that could mean one of two

22:04things . First , that the economy is

22:05suffering a catastrophe unlike anything

22:07ever seen . And second , which is even

22:09more likely , is that Marcia's portfolio

22:11is very poorly constructed . Even so ,

22:13the name of this phenomenon is sequence

22:15risk , and it is a risk always present

22:17in variable income . A financial planner

22:19can help you , for example , with a

22:21simulation . And a technique used by

22:23these experts is as follows : they run

22:25several simulations shuffling past data

22:27and simulating probabilities . And the

22:29name of this technique is the Monte

22:31Carlo simulation . But beyond these

22:33simulations , there are other measures

22:35we can take to avoid this type of risk ,

22:37which is our beloved fixed income .

22:40You’ve probably heard that having a

22:41percentage of your portfolio in fixed

22:43income is very important . Well , this

22:45here is a fixed-income ETF chart . Look

22:47how beautiful that is . It doesn't have

22:49that frantic up-and-down movement that

22:51we see in variable income charts . Even

22:53if we zoom in on the chart , we can see

22:55a slight jaggedness , but it is still

22:57always trending upward . And

22:59fixed-income ETFs have market makers ,

23:01so you practically always have

23:03liquidity , allowing you to pay less in

23:05taxes and smooth out your portfolio . So

23:08, although variable income offers a

23:10higher potential for real gains , it is

23:12precisely the percentage of fixed

23:14income that will smooth out these

23:15drawdowns , reducing the effect of

23:17sequence risk . I brought another chart

23:20here , for example . As we increase

23:21exposure to fixed income , we also end

23:24up decreasing volatility . Take a look

23:26at this purple line , for example , with

23:2870 % in fixed income . Even the drawdown

23:31in the middle of the chart wouldn't

23:32cause as much trouble as if we only had

23:3410 % in fixed income . And the name for

23:36this is decorrelation . Fixed-income

23:38ETFs are , in a way , decorrelated from

23:41variable-income ETFs . Back at the

23:43beginning , when I introduced Márcia's

23:45portfolio , we had ETFs A and B , which

23:47were fixed-income ETFs . In other words ,

23:50besides the return , they also have the

23:51function of smoothing out drawdowns . So

23:54, in this example , in a bear year with

23:56poor equity performance , instead of

23:58representing a 24 % drop , it will

24:00represent -1 % , for example , and so on .

24:03So , in this example , the average

24:05portfolio return is now 12 % , but with

24:07less severe drawdowns . Even so , the

24:10number of dangerous years decreased ,

24:11and the final result was much better .

24:13Of course , this is an illustration

24:15using example values , but the idea here

24:18is to show that fixed income isn't just

24:20about risk tolerance or how brave you

24:22are . There is also risk capacity , which

24:25isn't a matter of courage , but rather a

24:27question of math and probability . For

24:29example , what is your age ? When do you

24:31intend to retire and live off your

24:32income ? How much will you receive as a

24:34supplement from Social Security ? And so

24:36on . Another way for you to reduce these

24:38drawdowns is by using uncorrelated ETFs

24:40. In Márcia's portfolio case , ETF C is

24:43an international stock ETF for

24:45developed countries , while ETF D is for

24:47countries like Brazil , or emerging

24:49markets . So , when one falls , the other

24:51rises . And thus , this also helps in

24:53smoothing out those drawdowns , those

24:55drops . For example , if the US falls

24:57significantly , but Brazil rises

24:58significantly at the same time , when

25:00Márcia looks at her portfolio , she

25:02will see a dip , but she won't see an

25:03extreme crash . That's why it is

25:06important to have a strategy of ETFs

25:07that complement each other , meaning a

25:09certain lack of correlation between the

25:11ETFs . Wow , guys , I'm tired ; I've talked

25:13a lot today , haven't I ? Wow , let me

25:14even drink some water . So , in this

25:15video , you learned the following : that

25:17the correct way for you to live off

25:18your earnings is by looking at your

25:20withdrawal rate . Over the years ,

25:22regardless of whether this withdrawal

25:24rate includes dividends or asset sales ,

25:26living off the income of a portfolio of

25:28just ETFs is as simple as having a

25:30dividend portfolio . The third thing is

25:32that the dividend that lands in your

25:34account doesn't matter . What really

25:36matters is the withdrawal rate and the

25:37total return of your portfolio . And

25:40last but not least , every type of

25:42variable income , even with dividends ,

25:44forces you to deal with

25:45sequence-of-returns risk . And to

25:47protect yourself , you can use

25:49decorrelation , for instance , through

25:51fixed-income ETFs . And now I’m going

25:53to give you my opinion . It’s very

25:54easy to look at a dividend dropping

25:56into your account every month .

25:58There’s a whole dopamine hit and

25:59euphoria in seeing that money appear in

26:01your account , you know ? As if it were ,

26:03I don’t know , growing on a money tree

26:05. It’s a somewhat addictive feeling .

26:07And that’s why so many people sell

26:08the dividend idea . But in practice , in

26:11my opinion , it’s actually

26:12irresponsible , because the right way to

26:14use your dividends is that you have to

26:16measure them , you have to calculate

26:18them so that you reinvest a portion to

26:20avoid eroding your purchasing power .

26:23And this part few people explain and

26:25many people ignore . And most investors ,

26:27myself included back in the day when I

26:29was still learning , don't know the

26:31problem with living 100 % off your

26:33dividends . I , personally , Lorena ,

26:36prefer to live off my earnings from my

26:38ETF portfolio , because , besides

26:40statistically having a better chance of

26:42higher returns , it’s much simpler ,

26:44both in this current accumulation phase

26:46, investing every month , and later in

26:48the withdrawal phase , once I reach

26:50retirement . And when I finally

26:52understood that selling a portion of my

26:54assets , my ETFs , is the same thing as

26:57receiving dividends , my mind was blown .

27:00And it’s true that ETFs pay taxes ,

27:02but in the end , it doesn’t matter ,

27:04mainly because index ETFs have proven

27:06higher chances of outperforming a

27:08stock-picking portfolio . It’s that

27:12thing I always say , I’d rather make

27:14100 and pay 15 in taxes than make 50

27:15and pay nothing at all . And now that

27:18you’ve stayed until the end of this

27:19video , it’s time for the reveal ,

27:21let’s pull up the reveal of

27:22Márcia’s portfolio . And folks , this

27:24is not investment advice . If you

27:27blindly copy Márcia’s portfolio

27:29without really understanding your

27:31investor profile , your goals , and the

27:33strategy you want to follow , you’re

27:35going to get burned , okay ? This

27:37portfolio is really , like , just an

27:39example . I have other videos here on

27:40the channel talking about this topic

27:42and I chat a lot over on Instagram .

27:44Once a week I answer questions in my

27:45stories . So if you don’t follow me ,

27:47follow me there too , and that way I can

27:49even help you build a suitable

27:50portfolio . So if you liked this video ,

27:52don't forget to leave a like , a comment

27:54, subscribe to the channel , and I'll

27:56leave this video here for you to watch

27:57next , where I counter the dividend

27:59generation strategy , which is all

28:01related to this video . See you in the

28:03next video , then . Kisses , bye .