The return on an investment depends on the type of investment
Regulated savings accounts that guarantee your capital offer a return that is lower than inflation (1.1% in 2019 compared to 0.5% for the Livret A). As a result, you lose purchasing power. Over ten years, the annualised return on an investment in the Livret A is 1.24%. That of the Plan d’épargne logement (PEL) is hardly better: 1.90%.
Is life insurance in euro funds, another favourite investment of the French, the best investment? No, because its performance is declining due to the low interest rate environment. Its annualised return over ten years peaks at 2.37%, from which the tax applied to the gains (30%) must still be subtracted.
Real estate investment perhaps? While Paris is an exception (average annual growth of +5.17%), property market prices in Marseille, Lyon, Nice and Toulouse are pale in comparison: between +1.79% and -1.38%. In addition, the management of rental property is time-consuming with risks of non-payment. Paper-based property is more efficient, although its yields are continually falling (from 6.07% in 2009 to 4.35% in 2019). Not to mention unfavourable taxation and charges of around 10%, excluding tax, of the rent received.
There is nothing extraordinary about commodities either, even if gold is more interesting (+6.54% per year over a decade) than oil (-2.47%), which will have depreciated sharply by 2020. So, when it comes to long-term investing, all eyes turn to the stock markets to get a better idea of the return you can expect from an investment.
How much does investing in the stock market pay?
There is no doubt that investing in shares has been the best investment over the last decade. On an annual average, the three stock market indices (American, European and emerging markets) have risen by 10.59%. Better still, over the last five years, the S&P500 index, which includes the 500 largest listed US companies, has returned an average of 13.21% per year!
Yes, investing in the equity markets means assuming a certain amount of risk in your strategy. But this risk premium actually suggests higher investment returns. In France, aversion to the risk of capital loss is very high: only 4% of total French savings are invested in shares. And the stock market jitters inherent in its operation clearly tarnish the image of this category of investment.
However, it is sufficient to establish an investment strategy over several years in order to smooth out the risk over time. Another warning: launching into portfolio management alone, without experience or time to devote to it, leaves too much room for psychological levers that bias decision-making (sheep-like behaviour, panic buying, etc.).
This is why it is important to be accompanied in the choice of your investment vehicle and in the management of your assets, in order to achieve your objectives, including profitability.
PEA, CTO, life insurance: what should you choose to invest in the stock market?
There are three ways to invest in the stock market: the securities account (CTO), the equity savings plan (PEA) and unit-linked life insurance (UC).
The CTO allows you to hold all listed company shares, bonds, investment funds and trackers. This flexibility is reflected in the absence of limits on deposits and withdrawals. On the other hand, taxation reduces the return on investments. In comparison, the PEA leaves less room for manoeuvre with a deposit threshold of EUR 150 000. In addition, any redemption during the first five years of ownership removes its tax appeal, while causing it to be automatically closed.
The best compromise is the unit-linked life insurance contract. Why is that? Because you benefit from all the advantages of life insurance in terms of liquidity, taxation and inheritance. Above all, you can choose to be accompanied by financial experts in managing your portfolio.
Management under mandate consists of entrusting your savings (to give a mandate) to management companies that identify the best opportunities to increase the return on your investment. The client chooses an investor profile corresponding to his objectives. This profile then controls the asset allocation strategy, knowing that it is possible to change the profile at any time.
What Nalo brings you to boost your investment return
The 100% online life insurer Nalo allows you to invest in the stock market by maximising the return while minimising the risks. Since 2007, the average annual performance of a 95% equity portfolio is 8%. This level of return on your investment is made possible by low fees that do not erode the performance of your investments (no payment fees, exit fees or arbitration fees). How can this be achieved? By eliminating intermediaries and automating low value-added tasks.
The combination of technology and human expertise allows Nalo to be half the price of a traditional bank! This advantage is reinforced by the nature of the preferred investment vehicles: index funds called ETFs (Exchange Traded Funds), whose passive management is therefore less expensive. Why is this? Because it only replicates the evolution of a stock market index.
An ETF is composed of shares or bonds from hundreds of companies (or states), guaranteeing broad diversification. You can even choose to build up a portfolio of eco-responsible investments, known as SRI ETFs, which demonstrate their performance. In this way, you benefit from a diversified portfolio at a lower cost and with a higher value.
And as each life path is different, Nalo promotes personalised life insurance that evolves according to your situation (personal, professional, asset) and your projects (retirement, children’s education, rental investment, etc.). This exclusive management is quite simply the formula that allows you to get the best out of your capital!