Investment strategies for optimizing the reduced return on Livret A savings accounts: recommendations sought
Graphing Outside the Box: Exploring Savvy Investment Alternatives Amidst Livret A's Dwindling Yield
By Quentin Bas Lorant, Frisky Journalist placed at our site.fr, Published on , last modified on
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In the face of the announced cut in the Livret A rate, savers are finding themselves in a bind, searching for viable investment solutions to safeguard their savings while maintaining a decent yield. Life insurance, SCPI, bonds - here are the prospective options.
Say goodbye to the certainty of a 2.4% yield, as the Livret A's guarantee plummets. Although it might rise to a peak of 3% between August 1st, 2023, and February 1st, 2025 due to high inflation, brace yourself for a drastic fall to 1.7% by August 1st as inflation slows. Traditional alternatives like classic savings accounts ("super livrets") or time deposit accounts will also feel the pinch as their rates correlate with the decline in inflation.
So, how can you keep your money working hard? By embracing a bit more risk or locking down your funds for a longer period.
Euro-fund Life Insurance: The Natural Competitor to Livret A
First up, the natural choice: life insurance, specifically Euro-funds. They provide a guaranteed capital, similar to your Livret A, ensuring there's no loss of capital and preserving liquidity (albeit with a slight delay of a few days to a week).
Euro-funds boast a strong performance with an average yield of 2.6% in 2024, net of social deductions. Top-tier contracts have offered up to 4.65% on their Euro-funds in 2024: "There are some very attractive 100% Euro-fund offers, with boosted yields of up to 4.5%, on a liquid product, guaranteed in capital and better rewarded than the Livret A, all without taking on additional risk," explains Antoine Delon, president of Linxea brokerage. French savers have indeed jumped ship, massively exchanging their Livret A for life insurance at the year's beginning.
SCPIs: Ready for a Comeback
SCPIs, or Société Civile de Placement Immobilier (Real Estate Investment Funds), could see a resurgence in the near future. This investment strategy involves purchasing shares in a fund that invests in professional real estate (offices, retail, logistics, etc.) and distributes a portion of the rental income to investors.
The risk is present, but it's considered moderate (with a synthetic risk indicator of 3/7 or 4/7). However, since real estate investment is long-term, you won't be able to recover your initial investment for several years - usually a span of at least 5 to 8 years. However, if you're willing to ride out the term, you could stand to make some solid returns compared to your Livret A.
In 2024, the SCPI market showed an average yield of 4.72%. Some products have even reached over 10%. This venture may be worth the wait for a low level of risk: "With declining returns on low-risk investments and the expected real estate market recovery, we're seeing an increased interest among clients in this asset class," says Olivier Herbout, co-founder of investment platform Ramify. Be mindful that the taxation of 100% French SCPIs involves taxation of rental income according to one's marginal tax rate (TMI) and an additional 17.2% social levies.
Bonds: Rewarding Yields with Moderate Risks
Lastly, consider the allure of bond investments. Put simply, investing in a bond involves lending money to a state or company in exchange for regular interest (the "coupon") and eventual return of the loaned capital at maturity. The bonus is that you can specify your desired risk level and the corresponding yield. Borrowing from highly-rated states or large companies can yield between 3% to 4%. Dabbling in riskier corporate bonds (rated "high-yield") can yield up to 7%.
There are two ways to do this. First, invest in bond funds (bundling several state and corporate bonds) through your securities account, or the units of account (UC) within your life insurance. "Some funds available in life insurance aim to surpass 5% by 2031, such as the Carmignac Credit fund (a mix of state and corporate bonds), with a risk level rated 2/7," adds Antoine Delon. Alternatively, invest directly in bonds of your choosing via your securities account. Either way, since funds and bonds are listed securities, you can liquidate your investment during regular market hours.
>> Explore our Life Insurance Comparator Read our publications Additional Resources Why risk euro-fund life insurance over Livret A? With its guaranteed capital, competitive yield, and liquid options, euro-fund life insurance presents an appealing alternative to Livret A, especially as inflation slows down and banks lower rates to match.
Which investment is best for you? It depends on factors such as risk tolerance, liquidity needs, and investment horizon. Consult with a financial advisor for personalized advice.
>> Our life insurance comparator trial Check out our publications Related Topics Life insurance ⋅ Investments ⋅ Savings ⋅ Savings accounts
In the context of declining Livret A yields, people are seeking alternatives to secure their savings with a decent return. Life insurance, such as Euro-funds, can offer a guaranteed capital with an average yield of 2.6%, surpassing Livret A's projected yield.
SCPIs, or Real Estate Investment Funds, may rebound with an average yield of 4.72% in 2024, presenting a potential opportunity for low-risk investors. However, the timeframe for recovery is long, usually several years.
Bonds, by lending money to states or companies, offer various risk levels and yields, ranging from 3% to 7%, making them another viable option for investors. Life insurance funds that invest in bonds aim to surpass 5% by 2031, providing liquid options to investors.
In navigating these alternative investments, it's essential to consider one's risk tolerance, liquidity needs, and investment horizon; consulting with a financial advisor for personalized advice is recommended.
