Inflation destroys risk-free investment
The recovery of the world after the health crisis has brought about a surge in energy and raw materials, Saturation of sea shipping and supply difficulties for certain manufacturers. The war in Ukraine is putting pressure on this price.
Enough to push inflation to unknown levels for a long time: Almost 3% in France and almost 5% in the euro area in 2021. It is impossible to know if this situation is permanent.
-This price increase is even more disadvantageous for savers who have invested in life insurance funds in the euro.Support with these capital guarantees, where insurance companies pay interest annually.
-Their savings are losing more and more purchasing power The return on this investment is significantly lower than the surge in living expenses.
-According to the Good value for Money site, which specializes in insurance, the average rate of return in 2020 was only 1.10% before social security contributions and taxation. “By 2021, it should be below 1%,” predicts Cyril Chartier Castler, the site’s founder. Or 2 points less than inflation.
Our advice: If you need a capital guarantee, or if you need a short-term investment, life insurance in the euro is still the best investment. “But it is no longer recommended to use it to increase medium- to long-term savings.” Independent Wealth Management Advisor Yves Gambert de Lignier argues.
SCPI, investment holding up despite the boom in telework
•• The Real Estate Investment Company (SCPI) has been very successful for 10 years because it provides savers with regular income. Those who invest in offices and shops still bring more than 4% annually before deducting taxes and social security contributions. These companies manage real estate assets and their rent is paid to the subscribers.
•• But today, with the rise of telework, companies are shrinking their office space, especially in Ile de France. There are more properties to rent, rents are flat and you need to give them a few months of “free” to attract tenants.
At the same time, small businesses and shopping malls are also suffering from pandemics, facilitating online commerce. As a result, the rental income earned by certain SCPIs is declining.
•• Nonetheless, most of them resisted well, especially by using their financial reserves to maintain the income paid to their subscribers: This is equivalent to 2.1% of the stock value in the first half of 2021 (that is, 4.2% on an annual basis), minus income tax and social security contributions. It’s almost the same as before the health crisis.
•• Despite the crisis, this is arguably the reason Saver began repurchasing Office SCPI shares in 2021, but at a slower pace than before. They are also migrating to special SCPIs in health and logistics related real estate (such as warehouses).
Our advice: Privilege SCPI subscription in life insurance policy: Therefore, you can benefit from the more favorable taxation of this support. Between very low-return euro-denominated funds and higher-risk stock market units, SCPI offers an unparalleled happy medium.
–SCPI Denormandie, tax incentives are at stake. These SCPIs collect savings and buy numerous homes to diversify their portfolio. Your payment qualifies you for a tax cut. If you don’t want to worry about anything, you can buy the SCPI Denormandie stock.
Stock Savings Plans (PEA) are used to invest in stock market funds rather than life insurance. pattern? There is no inheritance tax exemption and only European equities are accepted, but life insurance allows you to enroll in a wider variety of funds (bonds, American equities, Asian equities, etc.).
However, PEA fees are much lower than life insurance policies. And the income tax exemption on profits will be complete after 5 years (Excluding social security contributions), Life insurance is limited.
Old PEL, Guaranteed Rate Life Insurance Contracts … Interesting Old Investment
of Very rare life insurance policy in the euro Providing a guaranteed minimum interest rate until the end of the contract provides a higher return than inflation at over 3% per year, as some very old home savings plans do.
PEL, on the other hand, has been open for only a few years and reports 2% or 2.5% before its contribution to social security outweighs changes in living expenses.
Old real estate, a safe haven in the face of rising prices
•• House prices are skyrocketing.
-During the pandemic, the enthusiasm for French stones has not been denied. However, since the imprisonment in March 2020, the desire to be environmentally friendly and the rise of telecommuting have led to the purchase of homes primarily in the suburbs of the capital and metropolises, and second homes in the countryside and on the coast. rice field.
-The influx of buyers was sometimes inadvertent and rushed, pushing up the prices of these properties. Older home prices in the state rose 8.8% year-on-year in the third quarter of 2021, and home prices rose 9.4%, according to notaries.
•• This dynamism may encourage investors to look at old real estate.
-Rental investments are becoming more and more attractive today as they can be rented at very low cost. According to credit broker Meilleurtaux, we have a good track record for over 15 years and can get credit for less than 1% excluding insurance.
•• Rent investment in new buildings is no longer attractive, Some savers looking for tax aid are looking to the infamous Denormandy project (named after the former Minister of Housing). The number of small and medium-sized cities eligible for this tax incentive is growing rapidly.
-This device allows you to buy a home (House or apartment) Refurbish it and benefit from tax cuts. It can represent up to 21% of the property’s price, It depends on the number of years of rent (up to 12 years).
-Work should represent at least 25% of the operation Improves the energy performance of the house.
-To take advantage of tax incentives, you must rent a property for a capped rent, even for those whose resources do not exceed a certain cap. But in reality, in most of the cities involved, these caps are higher than the rent in the market and the income of the majority of households.
-“The hope of capital gains is probably less important than the big cities. Emphasizes Jack Dupe, Director of the Maine-et-Loire Departmental Housing Information Agency. However, reasonable purchase prices often result in attractive rental yields. “
Our advice: To invest well Choose a city with a real estate market you know And rental demand, and where you can find a reliable contractor for your job. And don’t hesitate to go there to avoid bad surprises …
Unregulated rent. Another benefit of investing in a medium-sized city: Rent management is rarely envisioned, but following Paris, more and more large cities are adopting or considering rent management. This can delay rent increases, even if inflation accelerates, and is detrimental to landlords.
Diversify assets in the stock market
•• After the soft spot in the spring of 2020, the stock market soared during the pandemic. In 2021, CAC 40, the flagship index of the Paris Stock Exchange, broke its historic record.
– why? This is because Western central banks maintain very low interest rates to support their economies, which reduces the performance of many competing financial investments.
-Investors have no choice but to make it public If you need a profitable financial investment, buy stock in the company.
•• Therefore, savers are increasingly investing in the stock market through multi-support life insurance policies. When a so-called “patrimonial” fund that limits risk is offered, it limits risk, but is a more aggressive stock market fund (which goes further when the stock market rises, but can lose even more when it falls). ).
-Today, 38% of the amount invested in life insurance goes to account units. That is, mainly these stock exchange funds, and more slightly, SCPI.
-“Moreover, there are fewer and fewer saver options,” said Cyril Chartier Castler. “Most insurers no longer accept new payments in euros for life insurance contracts alone. They require that at least some of the new savings go to the unit of the account.”
•• This risk take has been rewarded so far. For example, funds invested in European equities have increased by 51% over the past five years (performance by the end of October 2021), according to statistics from financial firm Six Group. Even better, savers who invested in US equity funds would have nearly doubled their stakes over the same period.
•• However, most account units do not have a capital guarantee.MeTherefore, if the stock market is sluggish, you may incur losses. To limit the risk, insurers are proposing to distribute their savings to several different funds. Some even offer turnkey management for you to distribute your capital among different funds.
-Another way to invest while limiting risk is to choose a “formula” fund with a full or partial capital guarantee at a specific maturity, for example after 5 years. We recommend that you carefully read the information documents approved by the AMF (Financial Markets Authority) to measure the expected benefits and risks taken.
-“Be careful of bond funds and those with a lot of government bonds”, I suggest Yves Gambart de Lignières. If continued high inflation boosts interest rates, these bonds, which are already unprofitable today, will suffer capital losses.
Our advice: As Yves Gambart de Lignières suggests, “Before investing, ask yourself the level of loss you can temporarily accept if the stock market plunges. This will give you a better understanding of the risks you are willing to take.
Life insurance, how to change the contract?
If you still have a life insurance policy only in euros, Without other means of investment, it is possible to transfer savings to a more modern contract with the same insurance company without losing the old tax benefits. However, make sure you don’t have to pay any fees, the account units offered are attractive, and that the new fund’s rewards in euros are well maintained.
Investing in new construction is worth it
New home prices are breaking records, Due to the soaring prices of raw materials, the shortage and rising construction costs are the cause. What discourages you from buying new things or building them for rent? In particular, the government has made the Pinel system, which offers tax cuts for this type of investment, less attractive in recent years.
This tax incentive will no longer be granted to homes and will be limited to real estate in the toughest rental market. Therefore, it is the most expensive to buy. It also needs to be redesigned in 2023.