5 investment strategies for a young person under 25

 5 investment strategies for a young person under 25

5 investment strategies for a young person under 25

At 25, young people do not always think about investing, simply because they are just entering the workforce and do not think, for the most part, that they can afford to save.

And yet, the earlier you invest your money, even if it is only a few tens of euros per month, the more you mechanically increase your assets to prepare for the future.

Here are 5 investment strategies within reach of young people that you should not miss!

Investment n°1: precautionary savings

Before investing, it is necessary to build up precautionary savings, which are always available. This serves as a safety cushion in the event of a hard blow and should therefore not represent all your savings, only enough to deal with hazards such as a change of car, a move or a loss of employment.

Your precautionary savings should not exceed 6 months of salary. Indeed, as it is mainly placed in savings accounts, it is poorly remunerated. You can only hope that the money invested does not lose value and that the interest rate paid follows inflation.

So, which booklet to choose for your precautionary savings? Here are the best choices for you:

  • The young booklet, because of its attractive rate of remuneration, but you will have to close it once you are 26 years old,
  • The LEP, if you are low taxed, allows a rate of remuneration higher than the booklet A for people with modest resources, without any taxation (interest rate of 1% in 2021),
  • Livret A, if you are not eligible for LEP, this is a regulated savings account guaranteed by the State, also exempt from income tax and social security contributions (interest rate of 0, 5% in 2021).

No need to multiply savings books, an LEP or a booklet A is enough to keep precautionary savings from which to draw if necessary!

Investment n°2: rental real estate

At 25, unless you have already founded a home and have well-defined projects, it is not necessarily wise to invest in your main residence. Indeed, you are not immune to professional mobility, a romantic encounter at the other end of France, or the arrival of one or more children in your home.

Thus, it is better, in most cases, to stay in rental and invest in real estate on a rental basis. The loan for the main residence will wait for the right moment, if however you do not change your lifestyle along the way, by opting for nomadism for example.

Several options are available to you depending on the budget and the time you can devote to rental real estate:

  • Investment in SCPI, allowing to hold shares of civil society having the management of a real estate portfolio, to benefit from the advantages of real estate without suffering the disadvantages (financing on credit from 50,000 euros of investment),
  • Investment in boxes, garages, studios, making it possible to build up a permanent property portfolio with a minimum of costs and maintenance, the LMNP Renter in Non-Professional Furnished option is also possible for furnished accommodation,
  • Investment in a service residence, allowing you to hold an apartment in a student residence, a tourist residence or a residence for the elderly or disabled, with a rent defined in advance with the manager of the contract.

Whichever option you choose, do not hesitate to use credit to invest in real estate. Indeed, it is a great lever to create a heritage without getting rid of your savings (current loan rates around 1% for rental yields around 3% minimum). You will be all the more likely to have access to it if you have not taken out a mortgage for your main residence.

Investment n°3: life insurance

Contrary to popular belief, there is no age limit for investing in life insurance, and the earlier the better. And if life insurance is favored by the French, it is because it is an excellent investment product, a real Swiss army knife of financial investment.

Thus, life insurance has more than one trick up its sleeve. Among other things, it allows you to:

  • To have savings available at all times, even if it is advisable to keep them for at least 4 years for tax reasons,
  • To pass on his assets to his relatives in the event of death and to change beneficiaries at any time,
  • Take advantage of a guaranteed return on the euro medium and attractive prospects on the unit-linked medium,
  • To benefit from attractive taxation with an allowance in the event of partial or total withdrawal,
  • Save at your own pace with periodic or one-off payments, etc.

Thanks to its flexibility, life insurance is appropriate for young people and its success is undeniable. In addition, it allows you to become familiar with the world of real estate and stock market financial investments, provided you choose life insurance offering maximum diversity in terms of units of account.

Investment n°4: the PER Retirement Savings Plan

Admittedly, we do not want to think about retirement at 25, but preparing for it as soon as we are young has many advantages, such as having peace of mind or growing our savings with complete peace of mind.

The PER is a long-term investment, and is therefore very suitable for young adults. You should still know that savings are blocked there until retirement. Be reassured, however, because early exit from the contract is possible, particularly in the event of the acquisition of the first main residence or the end of compensation following a period of unemployment.

In addition, the PER provides benefits similar to those of life insurance, but in addition:

  • It allows you to benefit from a tax reduction,
  • It can be opened by the employer with a contribution from him,
  • It often makes it possible to benefit from management piloted by the insurer, etc.

Like life insurance, the PER offers a secure fund in euros, as well as units of account allowing you to invest in bonds, shares, SCPIs, trackers, according to the terms of the contract taken out. In the same way, the exit from the contract on retirement can be done in capital, in annuity, or in a mixed way.

Investment n°5: the stock market

Certainly, the evocation of the name “stock market” can be scary, since this type of investment is subject to fluctuations in the financial markets and can cause a capital loss. But on closer inspection, funds invested in units of account on a PER or life insurance are subject to the same variations.

However, the stock market is a long-term investment, operating on a cyclical basis. Thus, although a temporary drop is possible, the stock market price has always ended up going up. To limit the risks, consider the following actions:

  • Make regular payments, whatever the share price, in order to smooth the risk over time,
  • Favor trackers, these are financial instruments that replicate the performance of a market (for example, the CAC 40),
  • Invest in the French, European, American, Asian markets, and why not, in those of emerging countries,

The key word for investing in the stock market when you are young is undoubtedly regularity and composure. We forget speculation, we favor long-term investments and we diversify our portfolio as much as possible.

To invest in the stock market, you can choose between:

  • For a PEA Plan d’Epargne en Actions, you will then benefit from a fiscally advantageous but capped envelope, and restricted to the European market,
  • For an Ordinary Title Account CTO, you will then have to pay taxes on your earnings, but can consider investing anywhere in the world or in specific sectors such as new technologies.