No matter how old you are, it’s never too soon or too late to start investing. Of course, your financial goals will be different depending on your plans, whether it’s to save up to purchase real estate in a few years or to prepare for your retirement in the long term, for example. And while age is not the only relevant indicator, it is an important indicator to take into account when adapting your investment strategy. The creation of wealth works in cycles, like our lives, so here is our investment advice, depending on the period of your life.
The main purpose of deciding to invest part of your savings is to make your capital grow beyond the return offered by savings accounts, in the more or less long-term. The investment can serve several purposes, including:
- Reducing taxes
- Increasing income
- Building wealth
- Preparing for retirement
Most individuals save (a little or a lot) every month, but generally opt for low-risk, or even zero-risk, financial products (regulated savings accounts, euro fund life insurance, or home savings). These are certainly secure investments, but in view of the returns posted on these vehicles, the conclusion is simple: by playing the security card, there is quite a risk of allowing your money to ‘sleep’, which inevitably translates into lost earnings over the years.
However, it is quite possible to invest in more dynamic investments (stock market, unit-linked life insurance, real estate, crowdfunding, etc.) by taking a few precautions to limit the risk: diversifying, investing for the long term, and adapting the product to your situation (risk appetite, profitability objective, savings capacity, possibility of locking in part of your funds, and depending on the period of your life).
Investing also makes it possible to finance (indirectly or not) the development of businesses and participate in economic growth. Today, it is even possible to specifically select financial products that contribute to sustainable development, while benefiting from attractive returns, to invest in another way. Birdee also offers investment portfolios dedicated to green growth.
Between the ages of 20 and 40: sow the seeds of your investments
When you are a student or just starting out in your career, you aspire to a certain financial autonomy: buying a car, moving into a new home, travel, etc. The main objective is to start saving regularly, even just a small amount, to develop good habits and create a reserve of available cash. Conventional vehicles such as regulated savings accounts combine security with liquidity, perfect in this case.
Life changes typically follow: settling down as a couple, children, etc. Your investment horizon is still a long way off, around 20 to 25 years. This is the ideal period to buy your principle residence, so you will in principle have finished repaying your mortgage around the time you’re ready to retire.
A little later, when your situation stabilises, you could also consider taking out a life insurance policy. Why? In France, life insurance benefits from tax advantages from the eighth year of the policy date, so take out a policy (with Birdee!) as early as possible. And since no payment is required after taking it out, you can wait until you have more savings capacity to invest more in your life insurance.
Lastly, investing in the stock market can be a real asset for your portfolio because the stock market’s profitability is much better over the long term, and the risk decreases with time. To support you, Birdee suggests you invest – even if it’s just €50 – in an ETF securities account with reduced fees.
Between the ages of 40 and 60: consolidate your financial foundations
In your forties, when the foundations of your life are more sound and your income is (often) higher than it was 10 years ago, it’s time to consolidate and diversify your portfolio.
If you want to invest in property to prepare for your retirement or increase your assets, you can still take out a mortgage – with minimal personal contribution – to make a rental property investment that will be self-financing thanks to the rent collected. You can also try your hand at real estate crowdfunding, which offers attractive returns in the medium term.
This is also the perfect time to boost your life insurance by adjusting your asset allocation strategy, from euro funds (guaranteed capital) to Units of Account (shares, ETF, etc.), which are riskier but potentially more profitable. Since Units of Account are subject to market fluctuations, the time that you have ahead of you is perfect for smoothing out the risks. At Birdee, we support you in this process after analysing your investor profile, to adapt your life insurance to your needs. You can also schedule recurring transfers that will add to your investment over time, in a way that is easy on your finances.
From the age of 50, the ability to save is normally at its highest level. So think about diversifying your investments as much as possible to spread the risk as much as possible. If you still want to invest in the stock market, choose passive management with ETFs. These are listed funds, which follow all the values of an index. There’s no need to know anything about the stock market.
This is also the age when you need to think about preparing for retirement and anticipating your future needs. To do this, you can refocus your life insurance and return to a more defensive profile, in order to preserve the gains obtained thus far.
Over 60: anticipate harvesting the fruits of your investments
It’s lastly time to retire! You may be lucky to have repaid the loan on your principle residence and to have independent children… so you can think about preparing for a possible dependency and passing on your assets.
First of all, if you have not been able to save enough throughout your life, but you own your own home, you might consider selling some annuities. This is a wonderful way to collect capital and have additional income for the rest of your life.
Then, you can withdraw some or all of the accumulated funds on your stock market or securities accounts to enhance your retirement, and make withdrawals from your life insurance, or even schedule an annuity withdrawal.
For French investors, life insurance is also a great tool for passing capital on, in particular for its tax benefits to the estate. In fact, capital paid before age 70 benefits from a tax-exempt allowance of €152,500 per beneficiary (€30,500 for all beneficiaries combined for payments made after age 70).
Lastly, don’t forget to enjoy your good days, and consider your children and grandchildren if your heart leads you in that direction: the law allows you to make tax-exempt donations that will delight the lucky beneficiaries.
Just as life is built step by step, so too is wealth, over time. At each period, there are investments to focus on and appropriate investment decisions to be made. Remember, it’s never too late (let alone too early) to start saving and investing. Birdee advises you to save regularly, even a small amount, and diversified, to build quality wealth.