Presentation of the different types of financial investments
Overview of the different types of financial investments
The French are historically attached to life insurance and regulated savings accounts. However, these supports have become less and less interesting in recent years. The phenomenon comes from the low interest rates. Thus, households are now considering alternatives.
In addition, they currently have access to different types of financial investments.
What is a financial investment ?
By definition, a financial investment consists in injecting your savings in a potentially remunerative operation over a given period. This term is often preferred to the term investment for savers. Investing implies a promising return, a high risk and a long horizon.
Nevertheless, the duration also makes it possible to decide between the different agents different types of financial investments.
In other words, an investment is riskier and less liquid, but has an interesting potential return. The investment is, however, more secure and less profitable. Moreover, the liquidity of the savings depends fundamentally on the chosen financial product. It is usually low, if you are looking for big gains. Conversely, more available funds offer little remuneration.
Discover this guide on where to invest your money.
It is also necessary to differentiate between financial investments and investment supports (or solutions). These funds are offered by economic actors such as banks, brokers, life insurers… On markets closed to individuals, the real financial investments will be made by these institutional investors. You will only be able to acquire shares in their portfolios.
That said, this nuance has no major impact on the savings system.
What are the different types of financial investments ?
Today, you have access to a myriad types of financial investments. This diversity can be explained by the dynamism of the market and the multiplication of mixed formulas. You will even have difficulty finding a contract made up exclusively of euro funds in life insurance.
From now on, the professionals of the sector systematically integrate UC (units of account) in these supports.
It is nevertheless possible to distinguish several categories of investments according to the assets considered and the savings strategies. Thus, individuals have the choice between :
- Stock market investments (securities account, PEA, UC…);
- Bank passbooks (Livret A, Livret Jeune, LDDS, LEP…) ;
- Savings (PER, CEL, PEL, PERP…);
- Real estate investments (SCPI, OPCI, SIIC…).
With the decline of traditional euro funds, life insurance tends to fall into the first category. Unit-linked products are investments in the financial markets. Similarly, dynamic euro funds are largely based on stock market investments.
Stock market investments
Most of the time, private individuals make stock market investments via a securities account or a PEA (Share Savings Plan). These solutions allow to invest in shares directly or through UCITS (Undertakings for Collective Investment in Transferable Securities). With a fund, you can invest in renewable energy, transportation, raw materials… The potential return is interesting, but the investment horizon will vary according to your interlocutor and your strategy.
It is strongly recommended to consider an investment for at least five years. The taxation is indeed more advantageous as from the fifth year. In this case, you will only have to pay social security contributions, i.e. 17.2%, on your earnings.
The taxation will be, on the other hand, 17.2% + 22.5% on a withdrawal before the 2 years of the account.
Despite the decline in returns, the bank passbooks are still very popular in France. These types of financial investments are especially appreciated for their reassuring and familiar side. As a reminder, the Livret A is historically the preferred savings vehicle of French households.
In 2019, regulated savings passbooks have thus collected some 16 billion euros of outstanding amounts.
Liquid and tax-free, these solutions are particularly useful in view of a substantial expense or in case of unforeseen circumstances. They represent, in the end, precautionary savings rather than real investments. Nevertheless, the funds do not involve deposit fees despite a remuneration of less than 1%.
Basically, the savings are very long-term investments. They are thus feared for their low liquidity. However, this immobilization will allow you to benefit from a better return and tax advantages. In addition, early release is possible in case of disability, overindebtedness, death of the spouse or civil union partner..
Savings are accessible to all types of profiles, regardless of income, age or professional situation. In addition to this characteristic, they are secure like regulated savings books. You will be able to benefit from a significant retirement supplement at the end of your stay.
Real estate investments
Stone is traditionally considered a safe investment. The same is true for real estate investments. However, these supports stand out because of their affordability and risk pooling.
Instead of buying a property, you can acquire shares in portfolios including buildings, offices, shops, etc.
On the other hand, you won’t have to worry about the costs associated with a direct purchase. These charges will be included in the management fees. In addition, you can benefit from interesting returns in the field.
It will be necessary however to follow the horizon of investment advised by the managers to benefit from an advantageous remuneration and a tax system.