In an economic context that has not been very pleasing in recent years, the prospects for a better financial life are not always easy to find. When you have finally managed to build up some savings – from a small nest egg to solid capital – it is quite normal to hesitate to invest it in projects you don’t necessarily understand. Moreover, faced with a plethora of opportunities and a proportional risk of being caught up in a scam, the anguish of investing one’s money is very strong.
However, the balance sheet is not as bad as all that. There are indeed profitable and secure solutions to make your savings grow, either to protect yourself against the unforeseen events of daily life, or to prepare your future or that of your loved ones. We, Bestrade.org, are going to tell you what to invest your money in. We will give you all the advice you need to make the right choice of products in which to make financial investments in line with your savings objectives.
How to invest your money and make a profit?
There are many ways to invest your money and make a profit. Depending on the strategy chosen and the capital available, it is preferable to choose one or the other. The key to making your savings grow is to diversify your portfolio as much as possible.
5 major investment families are to be favoured as they offer a good risk/return ratio:
- savings products such as bank passbooks ;
- life insurance contracts ;
- stock market investments ;
- real estate investments ;
- project financing.
These different options allow you to benefit from an increase, more or less in the long term, of your capital. It is also an opportunity to take advantage of tax optimisation which increases the profitability of an investment in a really interesting way.
The main purpose of investing money is to consolidate existing cash flow. Savings are often classified into 3 types:
- precautionary savings for a sum of money that yields a relatively small return but which is easily available, and at no cost, to cope with everyday needs and disappointments;
- medium-term savings that favour more attractive returns on longer-term investments. It is ideal for boosting the financing of a personal project without blocking your funds for years;
- long-term savings concerns all financial products that imply a moral or real commitment over at least 10 years. It is the solution most often chosen as part of a projection towards the future, such as preparing for retirement or children’s studies.
Where to put your money to make money?
The orientation of his or her investment(s) will influence the organization of his or her portfolio and where to go to build it.
The vast majority of savings products can be accessed from any banking institution: traditional commercial banks, most online banks and even some neo-banks that are diversifying their services. In the form of a passbook savings account subject to more or less constraints and advantages. One of the most widespread in UK is the Livret A, which is a regulated passbook savings account with a rate guaranteed by the State, a payment ceiling and tax exemption. The preferred solution for precautionary savings.
We can mention the Housing Savings Plan, which concerns medium-term savings that allow you to create a personal contribution with a view to investing in property. It is also a regulated passbook with rules that mainly govern the availability of funds.
The banks often offer their home savings products, unregulated passbooks, with more or less competitive interest rates, which often have the advantage of offering a permanent availability of funds, with no capital ceiling.
Bankbook investments are attractive options where you can invest your money without risk. It is a mechanical effect guaranteed by the institution where the subscription is made that produces the yield effect.
Life insurance contracts
It is a safe haven savings vehicle that is very popular with English savers. It is fairly easily accessible from insurance companies, asset managers and banks. From one contract to another, from one provider to another, life insurance policies have relatively low entry fees. Their operation is simple. The initial capital is invested in euro-denominated funds with returns averaging 1.5% – 1.7% per annum in 2019 on the least risky funds. The capital is regularly replenished by scheduled or free payments.
Several management options are often offered to life insurance clients:
- free and autonomous management. As its name indicates, the subscriber pilots from A to Z the components of his contract by choosing in which funds the capital is invested. There is a real risk of not making the most judicious financial choices without prior knowledge ;
- profiled management where the management company proposes and advises on a selection of euro funds and other derivative products. The life insurance policyholder makes his choice according to his strategy and his medium or long-term objectives;
- management under mandate, which transfers management authority to the financial investment experts of the company with which the life insurance has been signed. Very often, either online or following a direct exchange with a dedicated manager, an investment strategy is established which weighs on the investment and therefore its profitability.
Different portfolio compositions are available:
- prudent or defensive with a large majority of funds in safe euro of around 80/20 ;
- 1 or 2 intermediate levels (depending on the contractor) with a 50/50 or 60/40 split between funds in euro and other financial instruments such as shares or bonds;
- offensive with returns that can be very successful with a portfolio composition of the 30 /70 type. There is a greater risk of seeing its capitalisation crumble in the event of a drop in the stock market.
Stock market investments
Gambling on the stock market can be an effective method, over a reasonable period of time, to grow your savings significantly. It is essential to remember that stock market investments are risky financial instruments. We therefore recommend that you have a minimum of knowledge in the field as well as an investment strategy established as precisely as possible before engaging in stock market speculation.
We will say very little about the short-term investments that can be made on trading platforms managed by a CFD broker. Forex, crypto-currencies and other equities treated as derivatives based solely on a principle of betting on an upward or downward trend present truly significant risks, which do not fundamentally lend themselves to serene and sustainable profits. This type of trading – scalping and / or day trading – is not recommended in a strategy for medium and long term savings growth.
So where should you invest your money? Commercial banks and online banks have been offering very attractive online stock exchange services for years. It is then possible to open either an ordinary securities account by filling it with shares, bonds, warrants, etc. from the world’s main stock exchanges; or in a Plan Epargne Action (PEA) or a PEA – SME savings plan that promotes products – shares and mutual funds (FCP) in particular – that participate in the financing of local or international companies. Once again we strongly advise, unless you are really competent, to use discretionary management, with a defined level of risk-taking, for secure and profitable capital development.
It is unthinkable not to mention the refuge values embodied in raw materials. Metals have always been a reliable source of savings, in spite of occasional misadventures. Investing in gold and silver is a very good option as soon as you have a stocking to grow.
Real estate investments
It is an option that has been emulated for decades. Rental investment or investment in stone or even Non-Owner Movable Rental (LMNP) offers great advantages for savings aimed at medium or long-term availability. It is an excellent way to build up an active asset base that it will always be good to add value to when inheriting to descendants. The rental investment is a progressive windfall to generate additional financial resources. It can also be an opportunity to capitalise on dormant cash flow while benefiting from very attractive tax reductions.
Various schemes have promoted LMNP to the top of the list of investments that are both profitable in the medium and long term. Profits boosted by tax credits, tax allowances and complete exemption via laws favourable to this type of investment: the Pinel law, the Censi-Bouvard law or the Denormandie law to name only the most reputable and trendy.
Added to this are new legal entities that open the doors to financial markets that were previously inaccessible. For example, the Société Civile de Placement Immobilier, or SCPI, has exploded in recent years. A SCPI brings together individual investors who pool their funds to finance a property portfolio that is then rented out by professionals who need office space. This phenomenon is accompanying the gentrification of urban industrial areas where many tertiary sector companies are setting up their head offices and administrative spaces at lower cost.
Participatory investment or crowfunding does not only concern the financing of artistic, professional or solidarity projects. A new branch has emerged markedly over the last decade. It concerns real estate crowfunding and participative start-up investment.
The operation is simple. Investors from different backgrounds come together on a platform that offers financing for various projects. Each individual deposits capital that contributes to the realisation of the project carefully selected by the investment platform. When the financing ceiling is reached, the project is launched and generates monthly interest to each funder. At the end of the “repayment” each participant recovers his funds with a capital gain. A schedule is pre-established which makes it possible to know when the initial capital ( interest) is available again. A real estate crowfunding and start up launch blocks the savings for relatively short periods. Very often one year with a return of up to 5%. The entry fees are quite variable depending on the project concerned but remain accessible for most stock exchanges? If the project does not finally come to fruition, the sums invested are secured and reimbursed in full. The management and remuneration costs of the platform are paid by the promoters.
The following is an example of platforms offering this kind of participatory investment:
- Babyloan in the framework of solidarity micro-credit;
- Homunity for collective financing projects of real estate parks ;
- Lita, which supports start up projects oriented towards eco-responsible models.
As we have seen, there are many ways to invest your money without risk, at least with a limited level of risk. We can never repeat it often enough, but the key to solid, safe and growing savings lies in the diversification of one’s portfolio of financial investments. Obviously, the larger your initial capital, the easier it is to substantially diversify your assets. However, this is not the only driving force. Knowing what to invest your money in means knowing what you want to save for. Protect yourself from the inconveniences of everyday life? Preparing to finance a personal project? Protect your loved ones in case of disappearance?
Depending on the financial objectives defined, it is much easier to choose in which investments to invest your money and in which percentages to allocate your funds. Financing a property as a principal residence requires dynamic savings with a guaranteed return and permanent availability. A PEL or CEL are suitable options. A life insurance is a more relevant response to financing your children’s higher education with long-term visibility.
Investment diversification offers the freedom to gradually bring all your projects to life while having a certain freedom to change them with the security of not losing everything if one of the investments were to collapse.
If you are not sure of your choices, we recommend that you are accompanied either by your bank advisor or by a wealth manager who can guide you in your choices or even manage your investments for you.
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