Are your investments in your insurance contract giving you little? Worse, are you losing money? If the situation seems critical, do not act hastily. Here are three tips on how to respond better.
You hold a life insurance contract and you have invested part of your capital in units of account (UC), in the hope of getting more attractive returns than on your fund in euros. Unfortunately, you find that you are currently written off. A more than likely situation at the moment if we look at the performance of the CAC 40 since the start of the year (-20.74%). Be careful, there is no point in giving in to panic too quickly.
Your insurer, when suggesting that you invest in these units of account, must have told you: these potentially more profitable assets are also present risk of price loss unlike the Eurofund. However, these investments are assessed in the medium to long term. It is therefore normal to suffer some losses from time to time. Over the past 10 years, the average performance of unit-linked accounts has been up and down, as illustrated by a recent report from France Assureurs. After a year of +10.2% in 2012, performance gradually declined until it bottomed out in 2018, a year that ended with an average annual return of -8.9%. On the other hand, the year 2021 was better with +9.1%. Here is three tips to make the best decisions… keep a cool head!
Tip number 1: don’t resell in a panic
We can never repeat it enough. In case of loss, don’t panic. It is not advisable to resell your units invested in the various units of account. Why keep them? Quite simply because as long as you still hold them, the price loss is not concrete. You haven’t really lost that money yet. If you resell at this point, your capital is truly lost. If this asset no longer suits you, don’t sell everything on a whim: wait as long as possible for it to be back in the green before withdrawing your marbles. If the decline is confirmed week after week, resell little by little, just to give yourself a chance to profit from a hypothetical rise.
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Tip number 2: invest gradually
One more piece of advice: Don’t save up and invest as you go. Whether you have 100 or 50,000 euros to invest, it is not necessary to risk everything at once, especially if you have just suffered a price loss. Invest your savings gradually, via planned payments, e.g. will make it possible to keep up with fluctuations in the financial markets. Lose a little and, above all, gain much faster in the event of a recovery.
If the markets continue to fall, the saver will buy more shares for the same amount.
We must advocate a defensive method. If my risk tolerance profile is fairly balanced (50% in the fund in euros and 50% in unit-linked units), I invest 50% in these units of account over 12 to 18 months. If the market goes up, we will take three quarters of the increase. On the other hand, if the market falls more than expected, we will have supported the fall. As soon as the economy recovers, the saver immediately finds himself in a capital gain, explains Yves Conan, CEO of Linxea. And this regardless of the selected asset class.
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An opinion shared by other experts. Stefan de Quelen, managing director of Meilleurtaux Placement, also believes that this technique is particularly suitable for equity investments. Given the market levels, we can very gradually start taking shares in riskier assets. Imagine you have 100 euros to invest. It is better to invest this sum over several months. If the markets continue to fall, the saver will buy more shares for the same amount. And when the markets go up, there will be an elevator effect. It is a simple technique that allows you to enter risky markets without taking too many risks.
Why not pilot management?
For those who want to invest gradually, but who are not very familiar with the financial markets, pilot management can be a good solution. It consists in entrusting an external manager (different from your insurance company or your contract’s distributor) with the distribution and arbitration between the various support points in a life insurance contract. Pilot control has the advantage of making your life easier. However, the choice of pilot management often leads to an increase in administration fees unit-linked funds.
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Tip number 3: Choose to secure capital gains
That opportunities to secure capital gains, another option. Some life insurance contracts allow you to protect your interests. Once the winnings reach a certain amount, they are automatically placed in a security fund, generally a fund in euros. Your earnings are thus protected against market fluctuations. Among the contracts that offer this option, we can mention Mes-placements Libert, Evolution Vie, Darjeeling, Digital Vie or Multivie de Mutavie.
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Each contract applies its own criteria: amounts placed, threshold and size of capital gains necessary to trigger the option, frequency of updating the intrinsic value of the support in units of account… You must therefore be well informed before subscribing.
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