How and where to invest the money from an inheritance? Advice
It is estimated that the average sum received during an inheritance is 120,000 euros. This represents the equivalent of 8 years of salary at the minimum wage. Out of respect for the deceased and for this money to be used well, it is necessary to know where and how to invest it.
The strategies are numerous and must meet the needs of the heir. Everything will therefore depend on his financial objectives, his age, but also on his current personal and professional situation. We give you several tips from the lowest to the highest degree of risk…
Tip number 1: repay your bank loans early
If you have outstanding loans, particularly real estate, relating to your main or secondary residence and not intended for financial investment, then repaying them early could be the best thing to do thanks to your inheritance.
Indeed, a loan with an outstanding capital of 120,000 euros represents between 20,000 and 60,000 euros in interest to be paid to the bank. By repaying your mortgages in advance, you save interest and relieve yourself of a monthly charge that was impacting your budget.
Thus, you benefit from a better comfort of life and can quite decide to invest each month in an investment adapted to your objectives the equivalent of your old mortgage maturities. By doing so, you add financial assets to your real estate assets.
Good to know: the early repayment of your loans generates costs, it is useful to calculate them beforehand to know if the operation is profitable in your case.
Tip number 2: save on regulated or secure savings accounts
Placing a sum of money from the inheritance on a bank book reassures, makes it possible to overcome the hard knocks of everyday life and provides an envelope available at any time. However, it is advisable to invest the equivalent of 3 to 6 months of usual income only.
For what ? Because the interest rate on bank books is not enough today to keep up with inflation. In other words, you lose money by betting everything on a booklet A for example and your inheritance loses value.
Knowing this, the heir will have to move towards other investments, from the most secure to the most risky, depending on their projects (real estate acquisition, retirement, transfer of assets, etc.) and their risk appetite.
Good to know: once your credits have been repaid and your security mattress placed on a booklet, it is recommended to take advice from a financial adviser or a wealth manager for the rest of your investments.
Tip number 3: save or invest with life insurance
Life insurance remains an excellent investment choice without taking risk. By investing in the euro fund, your savings are completely secure and your net return is known in advance, taking into account the insurer’s management fees.
Despite everything, the interest earned by secure euro funds has been melting like snow in the sun for about ten years. Don’t expect more than a 2% return at best. The latter is however sufficient not to devalue the money invested and follows inflation.
However, it remains more interesting to choose life insurance in dynamic euro funds, the risk taking is low and the returns twice as high on average. You can even learn about the stock market if you feel like it thanks to multi-media contracts.
Good to know: 100% online life insurance is popular, it offers reduced costs and you should not hesitate to compare offers before choosing your insurer.
Tip number 4: invest in real estate with LMNP status
The status of non-professional furnished rental company is flexible, attractive, low risk and particularly suitable for real estate investment with a sum of 120,000 euros available.
It allows you to invest in a service residence by giving the management of the property you own to an operating company. In other words, you have nothing else to do but buy a property, sign a contract with the manager and wait for your return (6 to 10% on average).
The LMNP status is suitable for investing in a student residence, a business residence, a tourist residence or a senior residence. On the other hand, to be profitable, the investment must be considered for the long term (30 years) to take full advantage of the tax advantages it provides.
Good to know: the investment in LMNP must be considered, the place in which you buy an apartment or a studio, as well as the financial solidity of the manager, are all important.
Tip number 5: invest in real estate with SCPIs
The purchase of SCPI shares (Sociétés Civiles de Placement Immobilier) consists of a business real estate investment (offices, commercial premises, business premises). The investment fund is administered by a private manager whose goal is to optimize the profits to distribute them to you at regular intervals (quarter, semester or year).
This is commonly referred to as “paper real estate”. SCPIs offer attractive returns, often between 4 and 6% on average. The rents received are taxed as property income.
Good to know: investing in SCPIs is not free of risks, even if they are limited, the fund manager could go bankrupt for example.
Tip number 6: benefit from personalized financial advice following an inheritance
Through 5 different investment examples, we have seen that the amount received as part of an inheritance could be invested wisely. It is possible to preserve it or make it grow, and there are many other types of investment that could suit your profile.
However, as always in investment, the higher the expectations of gain, the higher the risk taken. In this context, the best advice is undoubtedly to have someone accompany you, especially if you are not familiar with all the examples mentioned above.
Indeed, it is essential to know your investor profile (cautious, balanced, offensive) to better understand your degree of risk aversion. A basic wealth audit will already allow you to have a better vision of the type of investment in which you can engage while continuing to sleep soundly.
The financial and real estate markets fluctuate constantly. Your investor profile obviously has a role to play in your decision, but it is not the only one. Indeed, your investment horizon and your plans for the future are also important.
You won’t make the same choices at 30, 50 or 70. In the same way, you will not have the same investment dynamics depending on whether you want to prepare for your retirement, your estate, finance your children’s studies or simply benefit from additional income.