Low cost stocks, small caps or dividends: which are the most promising ETFs to invest in this year?

In a scenario of uncertainties, selectivity becomes increasingly necessary to choose the best investment opportunities in 2023 – and prudence also applies to ETFs (Exchange-traded funds), also known as index funds.

This asset type tracks the performance of stock indices, fixed income, international assets and even cryptocurrencies. Among the most famous is the BOVA11, which takes as a reference the Ibovespa – main index of the B3 – which closed 2022 with an increase of 5.6%.

For 2023 experts heard from Money info keep their bet on ETFs focused on domestic stocks, but looking at funds with a more segmented profile.

“We see a still nebulous scenario for major stock indexes and real estate funds on the stock exchange, which would hurt ETFs like BOVA11 and XFIX11 [que replica o Ifix, índice dos fundos imobiliários]”, details a report from Levante.

The paper suggests investors opt for Brazilian equity-based ETFs in established sectors and at attractive prices, characteristics that would help protect the portfolio from the challenges expected in 2023.

Uncertainties x Opportunities

Among the main challenges for next year is the mistrust in relation to the fiscal policy that will be adopted in the third term of Luiz Inácio Lula da Silva, especially after the approval of the Proposal for a Constitutional Amendment (PEC) of the Transition.


The project allows the federal government to use up to R$145 billion – outside the spending ceiling – for payments to Bolsa Família, a social assistance programme.

The fear of an increase in public spending has led the market to raise the country’s interest rate curve, a movement that increases the profitability of fixed income and reduces the attractiveness of variable income – and of the ETFs that accompany the performance of riskier assets.

Despite the challenges, there are opportunities on the stock market that can serve as a benchmark for choosing ETFs in 2023. Quality companies are listed below what is considered fair value, analysts point out.

Overall, Ibovespa shares are trading at a 40% discount to the 15-year average, according to Fernando Ferreira, chief strategist and head of research at XP.

“The risk premium – which compares returns on variable income versus fixed income – shows that Brazilian equities are cheap even considering the high level of interest rates,” Ferreira says.

Small caps and good dividend payers on the radar

Vinicius Lima, partner and commercial director of Trígono Capital, an asset manager, also sees ETFs focused on domestic equities as a good strategy for 2023, given the level of discount offered by publicly traded companies.


He mainly mentions index funds that track the performance of calls small caps – companies with smaller market capitalization – which would be even more discounted.

More sensitive to interest rate fluctuations, these companies may also be a good alternative for those looking to make gains from the expected decline in the Selic rate, said Lucas Carvalho, head of investment analytics at Toro, in a brokerage report.

“Exhibiting in companies with this profile could be very interesting in 2023”, he reiterates. “[Seria possível aproveitar] a movement to lower interest rates and reduce risk aversion on the part of investors, with the potential to bring above-average returns,” he suggests.

Carvalho also sees opportunities in ETFs that track the performance of companies that pay good returns.

These companies, explains the specialist, are generally more solid and are already in a more advanced stage of maturity. Among them are companies from the financial sector, insurance and utility (toilets and electricity).

regional diversification

For those looking for even greater diversification, ETFs that reference international assets can be a good opportunity to mitigate domestic risks. On the list are options such as iShares S&P 500 IVVB11, which tracks the US stock market, and the Trend ETF MSCI China (XINA11), which tracks the Asian country’s stock index.

“It should be borne in mind that 2023 promises to be a year of high volatility also for US markets,” warned the analysts of Levante Investimentos in a report. “Because the Federal Reserve (Fed, the central bank of the United States) has not yet finished the monetary tightening that began in 2022 and the interest rate hike raises fears of the possible effects of a recession on the largest economy on the planet” – which would affect the whole world, complete the text.

Another point investors need to be aware of is the liquidity of ETFs. Only 15 index funds had average daily liquidity above BRL 5 million in 2022, according to a survey conducted by Einar Rivero, chief commercial officer of the TradeMap platform.

Of the list, only seven closed the year on a positive note. With a 13% increase, the highlight of the period was the DIVO11, which tracks the IDIV, the B3 dividend index. Check out the full list below:

ETFs ticking Average daily volume in 2022 (BRL million) Return in 2022 (%)
Time Idiv DIVO11 10,878 13.14
It Now Ifnc Index Fund FIND11 12.104 11.67
Pibb Ind Brazil 50 PIBB11 10,325 6.15
Now Ibov BOVV11 206,222 5.46
Ibovx trend BOVX11 11,689 5.15
Ishares Bova Ci BOVA11 819.180 5.11
Brad Bov ETFs BOVB11 5,367 5.07
Gold trend GOLD11 10.041 -6.27
Ishares Smal Ci SMALL11 136,240 -14.81
Now it’s small SMAC11 18,775 -14.81
Now Spxi SPXI11 15,173 -23.2
IShares S&P 500 IVVB11 122.105 -23.35
China trend XINA11 14,368 -26.62
Nasdaq trend NASD11 5,050 -36.78
Hashdex Nci HASH11 23,378 -68.55

Source: trade map

ETF market data and industry next steps

The ETF market ended 2022 with 630,000 investors participating, 35,000 more than in December 2021, according to the B3 monthly bulletin. Individuals account for more than 80% of the segment.


ETF market equity fell last year, from R$50 billion to R$43 billion. The difference is attributed to losses caused by many funds in the face of adverse performance in 2022.

Even so, Lima, of Trígono Capital, is optimistic about the launch of new variable- and fixed-income ETFs that complement existing B3-listed funds.

In this line there is also the wait for the listing of the funds that pay dividends, promised by B3 for the first quarter of this year.

Wise Capital – which has experience in the US real estate market with investments in REITs (Real Estate Investment Trusts, equivalent to real estate funds) – already has an ETF in this model ready to take off.

Additional benefits of investing in ETFs

In addition to diversification, investing in ETFs offers greater simplicity for investors looking to build a portfolio based on a theoretical portfolio or a collection of many assets.

“Faced with uncertainties, both globally and locally, ETFs are consolidating as an alternative for investors to make tactical allocations (quickly entering and exiting positions),” says Lima.

Market benchmark indices, for example, usually have their composition updated periodically. Anyone wishing to maintain a portfolio similar to indicators would have to adjust each portfolio’s holding based on the revisions.

In the case of ETFs, however, professional managers make the necessary adjustments whenever there is a change in the composition of the funds’ benchmark indexes, saving investors time.

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