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If you're asking the question, you're on the right track! Indeed, even on a small budget, it is best to start investing your money as soon as you can. Whether it's €50, €100 or €500, and even if it doesn't seem much to you, putting your savings to work is always profitable. Here are a few profitable investment ideas for small amounts of money.
First of all, a few basic rules
In a previous article we discussed the four questions to ask yourself before investing. To help you choose the right type of investment on a small budget, here are the main principles of any financial investment:
- Invest only the money you can spare from your day-to-day life;
- Choose investments you understand;
- Opt for investments that fit your goals;
- Diversify your portfolio as much as possible.
For each investment solution, ask yourself whether the risk/reward ratio fits your investor profile: if you do not like risk, know that there are alternatives that limit the risk of losing your capital while still paying out more than a savings account. Finally, choose investments that reflect your values... do not invest in oil companies if the environment is important to you.
It's up to you to choose the investment that suits you best!
Now that you have a better understanding of your investment goals, let's take a look at some investment solutions on a small budget.
# Life insurance is the Swiss Army knife of investment
Why not start by opening a life insurance policy? It's the most popular investment in France and for good reason:
- you can invest your money in euro funds (guaranteed capital), shares on the stock exchange, bonds, SCPI (real estate), etc.;
- you choose your portfolio in line with your risk tolerance and investment horizon;
- your money is not locked in and you are only taxed if you make a withdrawal (you are entitled to tax breaks once you've held the policy for 8 years, so it is advisable to wait until then);
- finally, when you pass your assets on, your loved ones can inherit the capital from your life insurance at very favourable tax rates.
It's worth opening a life insurance policy even with a small amount of money as a way of "setting a date" in order to benefit from the tax breaks once you've held it for 8 years: you can always make more payments later. In France, Birdee offers customised life insurance with several portfolios available.
# Investing in the real economy through crowdfunding
Another solution if you feel life insurance is a bit old fashioned... Why not give crowdfunding a go? It is a modern way to invest your money in companies, real estate developments or renewable energy projects, for example. Thanks to crowdfunding you can invest from as little as €20 depending on the crowdfunding platform!
How does it work? Generally, you lend a sum of money (in the form of a bond with a fixed interest rate) to an SME, a real estate developer, a renewable energy operator. This allows them to finance their project and repay your investment with interest after about 2 to 4 years. With this type of investment, one can expect a return of 4% to 10% depending on the project, but the return is proportional to the risk and you will need to choose wisely to limit the risk of capital loss.
# Real estate is accessible to everyone, even on a small budget
Would you prefer a safe investment such as real estate but feel that you don't have the necessary funds? Well, real estate is entirely possible, provided you look beyond rental investments.
If you already have some savings, you could start by buying a garage, a storage box or a parking space for example. They can be found for as little as €4,000 and can be almost as profitable as some apartments, all without the expense of renovating the façade or replacing the roof.
Another way to get your feet on the real estate ladder are Real Estate Investment Company, also known as "pierre papier" or "paper bricks and mortar". With Real Estate Investment Company , you buy shares in companies that rent out offices, shops, apartments, etc., and pay you a share of the rents. This investment offers a return of around 4% per year, without the disadvantages of property management.
Traditional savings accounts: in moderation
This is any saver's first port of call: investing in a Livret A, an LDD, an LEP for more modest amounts... and that's perfectly understandable: the capital is 100% guaranteed and available at any time. However, with rates of 1% on an LEP, 0.5% on a Livret A or LDD, these risk-free investments are simply not attractive prospects in 2021. Worse, because of inflation (estimated at 1.1% in 2019 by France's INSEE), your savings are being eroded, cutting into your purchasing power.
Because of this, these savings accounts should only be used to build up a savings buffer until you can invest in riskier but more profitable alternatives.
# Securities account, a flexible and efficient solution
Finally, if you are considering a dynamic, long-term financial investment, why not open a securities account? It gives you access to the stock exchange and a range of listed securities such as shares or bonds.
Maybe you're thinking "Why not, but that's not possible on a small budget...". But that's simply not true! Thanks to Birdee, you can start investing from €50! At last, an opportunity accessible to all, simple and with several portfolios adapted to your profile. Sign up online and benefit from Birdee's expertise.
