With funds in euros of contracts of life insurance, you will soon lose money without knowing it . Do not worry! The rule of the game has not changed: investment ‘favorite French “always guarantees your principal is 100%. What changes, however, are the performances in 2010 and promises more gains for the year. And not in the right direction! Add to that the likely rise in inflation , tax benefits trimmed, and the subscription rights as high as ever … and you get a real return in the red.
Yields falling
For ten years, yields on euro-denominated funds have continued to decline, following an almost continuous decline in interest rates. In 2010 they fell below 3.5%. In some institutions, the minimum guaranteed returns for 2011 are an unprecedented timidity, sometimes from below 2%, ie less than the rate of the Livret A. Remember that in 2005, when the Livret A rate fell to 2%, the euro fund yet deliver superior returns to 4%. Safety and performance: the dream of any investor.
Why this change? Insurance companies have simply exhausted their stocks of bonds acquired in the years 1990 to 2000 when bond yields long-term condition ranged between 5 and 10%. Conversely, given the success of the collection, they had to garner new bonds at rates far less attractive. Conclusion: yields drop, and do not go back before long .
Inflation: the slug that eats away at your savings
Yet at the same time, inflation rose. The European Central Bank (ECB) provides for 2011 an inflation rate above 2.5% , mainly due to higher oil prices. For an investor, inflation is a monetary erosion, that is to say a decline in the real value of money. In other words, even if your capital increased slightly in 2011, its purchasing power may decrease, eroded by rising prices. Without seeing it, you lose money.
The tax benefits in the viewfinder
To worsen the case of funds in euros, the government seems to have set his sights on the tax benefits of this investment for nearly one in two French. Recall that the products they generate are already taxed at 12.3% , no guarantee that the puncture increases in the future.
How to react?
Given this new situation, be more selective in choosing your life insurance. If your contract has more than eight years, the time may be ripe to look elsewhere. These are typically banks “provide” minimum: subscription rights high yields laggard. They make little effort to satisfy a captive clientele, while some smaller players (The Conservative Matmut, Maaf) and numerous contracts in toll are much more interesting. They took the party to better diversify their assets by focusing on equities and corporate bonds . If you do not want to hurt your bank, you can always arbitrate in favor of units of account. Which means a little more action and thus volatility . But inflationary period, we must take risks to make money. For the most cautious, there is the savings account. With, in this case, the certainty of seeing inflation eat part of your income.