Ghislain must maintain his positions. And he takes advantage of the current turbulence to refine his strategy by globalizing his portfolio and optimizing the taxation of his investments.
Passionate about sliding sports, Ghislain watched the Beijing Winter Olympics on his smartphone every day. For nothing in the world would the giant slalom and snowboarding events be missed.
On the Tuesday of our meeting, France scored eleven medals, three of which were gold. A score close to the Sochi and Pyeongchang records that made him happy.
Our friend is himself a great sportsman. He doesn’t ski but runs every morning before going to work. The weekend is cycling and swimming. He’s aiming to participate in his first triathlon with three colleagues, sponsored by his company, he hopes. An automotive engineer, Ghislain works remotely three days a week and two days on site.
He contacted Le Revenu because he was concerned about the evolution of the stock market. It bought its first shares in March 2020 at the start of the health crisis, only stocks with good growth (LVMH, L’Oreal, Dassault systems…) who have been drinking the broth since January.
Which strategy to adopt? Should we sell and enter cash while we wait for the storm to pass? Arbitrating in favor of more cyclical stocks with more reasonable valuation ratios? Ghislain is a little lost. He is not the only one! To provide personalized answers to his financial concerns, we analyzed his income, expenses, assets and debts.
As a result, he has the means to achieve his financial goals, but decisions must be made. Soon.
Recommendation No. 1: Invest a small amount every month
To consolidate and increase his earnings, he must continue his stock purchases. Like many newcomers to the stock market, he has invested a lot of money at one time, then nothing. Is a mistake. Investing a small amount each month is a rule of thumb. When markets are expensive, you buy few stocks; when they are cheap, you buy more. This operating mode optimizes cost prices and allows long-term profitability close to the market average, that is 7 to 8% per year (all the same!).
Ghislain must use part of his monthly savings capacity (almost 500 euros) to diversify into American and emerging stocks, taking care to avoid the eastern European stock markets that are too risky with the Ukrainian conflict. On foreign markets we recommend investing via tracker, listed index funds.
At low cost, they often give excellent results over time. We invite you to consult the Le Revenu test benches to find out the names of the funds to put in your portfolio.
Recommendation No. 2: Open a PEA and life insurance
Ghislain must also optimize the taxation of his investments. He buys his shares through a common stock account (CTO) and then pays a 30% deduction on his earnings. It’s a lot. If he had invested through an equity savings plan (PEA), the puncture would be limited to 17.2%, or 12.8 points less. Above all, the two fiscal envelopes have very different modes of operation.
With the CTO, he goes through the tax box every time he receives a euro in dividend or capital gain. With the PEA, direct debits only apply in the event of withdrawal. Until you get your savings back, the money you owe to social organizations stays invested and makes money that falls into your pocket.
The problem? Ghislain places his orders on the stock exchange through a “neobroker” who does not offer the PEA. He will then have to choose another broker. We recommend a 100% online player – half the cost of traditional banks – who offer a wide range of products and services and distribute funds and contracts awarded by Le Revenu.
We also recommend that you take out Trophée d’Or du Revenu life insurance. He will therefore be equipped to start investing well. The gains made in an annuity contract are taxed little and, on the death of the insured, the capital most often escapes any taxation. Ghislain must use life insurance to diversify his investments internationally knowing that the PEA is limited to the shares of companies based in the European Union. Furthermore, he can keep the CTO or close it.
It is up to him to see his future investment needs based on his expectations.
Recommendation No. 3: Enter the real estate business
It remains to optimize the real estate component of its assets. Ghislain has not yet invested in a home. Renter of a nice two-room apartment with balcony in a modern residence, he considers stone an “investment income”. This is not the opinion of the Revenue Agency. The purchase of the main residence remains, in our opinion, a necessary step in the establishment of an asset.
Owning your home would ensure your financial future and that of your loved ones. Tenants evicted from their homes by landlords who want to recover their property in the strictest of terms, this happens every day. We can add that in retirement when his income is halved, he will be very happy that he does not have to pay the rent every month.
Ghislain sees the purchase of a house as “a thread in the paw” that would slow down his mobility plans, including expatriation. A defensible point of view. It prevents! It is vital that he set foot in the real estate sector so as not to be kicked out of the market if ever the price increase continues. If he lacks personal and professional visibility to buy his home, we recommend investing in a second home or rental property.
Ghislain thanks Le Revenu for the quality of the advice and undertakes to keep us informed of the financial decisions he will take following our visit.
Lessons to be learned from this heritage study
All markets and all rating segments do not evolve in concert. Diversify reduced fluctuations in an equity portfolio .
Nobody knows how to predict when good stock market sessions will take place. The only way not to lose them is to stay constantly investedeven when flexing.