If your number one priority is the security of your investments as opposed to potential returns, you are undoubtedly a "cautious" or "defensive" investor. And there's nothing wrong with that! Risk aversion flows from feelings and emotions, it cannot be controlled. Of course, the best returns go hand-in-hand with risk taking, but if you'd rather stay on safer ground there are still savings solutions out there that offer a limited but stable return.
REGULATED SAVINGS ACCOUNT
Despite returns close to zero, with regulated savings accounts the risk of losing your money is almost non-existent. Put simply, they pay almost nothing but investors risk almost nothing. With an interest rate of 0.75% for the Livret A and the Sustainable Development Savings Account, the French are better off than the Belgians, who are only entitled to the legal minimum 0.11%.
That's a far cry from the Eurozone inflation rate which is running at 3% according to the European Central Bank. Nevertheless, there is no risk of losing your initial investment and the return is assured. What's more, the French and Belgian public have never deposited such large amounts in their regulated savings accounts as in 2019 and 2020!
Setting their almost zero returns to one side for a moment, it's worth acknowledging that these precautionary savings accounts are very useful to cover unforeseen events (house or car repairs, health care costs), or for family plans (holidays, paying for children's education, etc.).
the housing savings plan (pel)
Once intended as a way to save up to buy a hose, the French now use this product as more of a classic savings account. It's worth noting that the crisis has shaken things up. At 1% it offers a more attractive rate than the Livret A but with one condition! You have to lock your money in for at least two years. If you are in a hurry and make a withdrawal before then, you lose all the benefits and the account is closed. As such, the PEL is for people you who want to tuck their money away and wait for it to grow.
Another advantage (not to be underestimated) is that the rate does not change after you open the PEL and is valid throughout the plan's duration. If you or a family member has an older PEL, you're bound to have even more attractive rates. For example, PELs opened before 2011 averaged 2.65%. Our advice: don't close them!
Ah life insurance, France's favourite investment! In the first half of 2021, net inflows exceeded €1 billion each month, an all-time record. The advantages of life insurance policies are well known (advantageous taxation for inheritance, the option of making withdrawals), but their security may also be attractive if risk is not your strong suit. Provided you invest in euro funds!
Put simply, this type of investment offers a permanent guarantee: no matter when you withdraw, you will get your money back at the very least. Your liquidity is therefore assured. The "kiss kool" effect is that you'll have to make do with a fairly low return that varies from one bank to another. According to independent life insurance policy prescriber Good Value for Money, the average rate of return was 1.08% in 2020, compared with 1.33% in 2019. So still below the rate of inflation...
The Belgian equivalent to France's life insurance policies is called "branche 21". Products marketed under this label also have a guaranteed return, ranging from 0.1% to 1% in most companies. Nevertheless, it's best to choose policies with the lowest fees in order to make money where you can.
diversification, THE KEY TO INVESTING WISELY !
At Birdee, we will never push our customers towards a vehicle that is not suited to them. On the contrary, we respect your investor profile and find the vehicles that best meet your needs. There is, however, one constant when it comes to making your assets grow: di-ver-si-fi-ca-tion!
Given your significant risk aversion, Birdee allows you to invest as little as 50 euros in a securities account or life insurance policy. We have deliberately lowered our entry fee to allow everyone (students, but also people who wish to take little risk) to invest in vehicles that are more profitable than regulated savings accounts.
In addition to this, our portfolios feature, on average, 82.5% of SRI (Socially Responsible Investment) labelled assets, which gives meaning to your money by limiting the risks as much as possible while offering an attractive return! For example, our defensive portfolio achieved a return of +2.42% in the first half of 2021, twice as high as the Livret A.
You can adjust the way you save over the course of your life. For some years now, the interest on regulated products has been lower than inflation, which means that your interest is lower than the cost of living. So while it's true that these investments are risk-free you can also be sure that you'll never make any money!
We therefore recommend that you save in a diversified way, even small amounts, in vehicles that include some shares to limit your losses and maximise performance. With the Birdee application, you will have secure and fast access to your portfolio and can monitor your savings' performance in real time.
Find out why you should choose a defensive portfolio with Birdee here.