Start Investing - France

Question

I live in France and I am 20. I am in my 3rd year of computer science degree. Not working regularly yet !

I would like to start investing my savings into something profitale.

I currently have a LDD, a Livret Jeune and CEL. Should I go to my bank to ask questions about investement ?

The problem is that I don't know where to start and I am not interested in watching stock exchange rates all day long. I just want to place it somewhere and let it grow ^^

Could you give me advices or just tell me how you started your investing plan ?

Thank you !

Answer 1

I am not interested in watching stock exchange rates all day long. I just want to place it somewhere and let it grow

Your intuition is spot on! To buy & hold is the sensible thing to do. There is no need to constantly monitor the stock market. To invest successfully you only need some basic pointers. People make it look like it's more complicated than it actually is for individual investors. You might find useful some wisdom pearls I wish I had learned even earlier.

1. Stocks & Bonds

Stocks & Bonds are the best passive investment available. Stocks offer the best return, while bonds are reduce risk. The stock/bond allocation depends of your risk tolerance. Since you're as young as it gets, I would forget about bonds until later and go with a full stock portfolio. Banks are glorified money mausoleums; the interest you can get from them is rarely noticeable.

2. Index investing

Index investing is the best alternative. How so? Because 'you can't beat the market'. Nobody can; but people like to try and fail. So instead of trying, some fund managers simply track a market index (always successfully) while others try to beat it (consistently failing). Actively managed mutual funds have higher costs for the extra work involved. Avoid them like the plague.

Look for a diversified index fund with low TER (Total Expense Ratio). These are the most important factors. Diversification will increase safety, while low costs guarantee that you get the most out of your money. Vanguard has truly good index funds, as well as Blackrock (iShares).

3. Broker

Since you can't simply buy equity by yourself, you need a broker to buy and sell. Luckily, there are many good online brokers in Europe. What we're looking for in a broker is safety (run background checks, ask other wise individual investors that have taken time out of their schedules to read the small print) and that charges us with low fees. You probably can do this through the bank, but... well, it defeats its own purpose.

4. Tax advantages

US citizens have their 401(k) accounts. Very neat stuff. Check your country's law to see if you can make use of something similar to reduce the tax cost of investing. Your government will want a slice of those juicy dividends. An alternative is to buy an index fund on which dividends are not distributed, but are automatically reinvested instead.

Some links for further reference:

Investment 101, and why index investment rocks: However the author is based in the US, so you might find the next link useful.

Investment for Europeans: Very useful to check specific information regarding European investing.

Portfolio Ideas: You'll realise you don't actually need many equities, since the diversification is built-in the index funds.

I hope this helps! There's not much more, but it's all condensed in a handful of blogs.

Answer 2

In france you have several options:

Livrets

Livret A & LDD:

A good place to starts with: 1% as of may 2015 interest is low, but's money is 100% liquid (you can withdraw antime).

PEL (Plan épargne logement):

You got slightly superior interest rates, and have to wire at least 45€ a month on it. It gives you lots of advantages if you use it to buy a house. You cannot use the money unless you close the account, so it's not as flexible. You get 2% rates as of may 2015 which is quite good. [If you open this account now, it's only 1% making it not so attractive. Look at Life Insurance Instead.]

CEL

This one is useless: interest rate is too low.

Others

Life insurance (Assurance Vie)

I highly recommend this one. You can open it with 0 cost with several online banks (ing, boursorama, ...) Minimum deposit should be around 1000€. Rate is flexible, but usually higher than what you get with the others. You shouldn't withdraw the money before 8 years (because of taxes, but you can still do it if you need). You can add money on it later if you want. Because of the 8 year duration, it's better to open one as soon as you can, even with the minimum amount.

Summary

Open an PEL + Livret A + Life insurance.

Put the minimum on both PEL + life insurance. Put every thing else on Livret A. If you are 100% sure you don't need some of the livret A money, send it to PEL. [As of 2017, PEL is not so attractive anymore. Bet on the Life Insurance instead, unless your account was open prior to this].

Answer 3

You mention you have an LDD. If your income is below a certain threshold (as of today, 19 255 € a year for a single person; quite likely if you're just a student), then you can open a Livret d'épargne populaire (in short, LEP).

It works almost exactly the same as a Livret A / LDD, except that:

• your income must be below the threshold already mentioned: 19 255 € a year for a single person;
• the interest rate is higher: 1,25 % instead of 0,75 %;
• the deposit limit is lower: 7 700 € instead of 22 950 € (Livret A) or 12 000 € (LDD).

Just like a Livret A / LDD:

• you can only own one;
• you can freely deposit or withdraw money from it;
• there is no tax on the income generated.

You should fill it up first before putting money in your LDD (assuming your Livret Jeune is maxed out, they have typically a higher rate than the LEP). If your bank is anything like mine, the very existence of the LEP is not very well-advertised, and I found that not many people are even aware that they exist.

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PS: The French administration's website has a whole section dedicated to financial matters. It's usually very clear and detailed. I advise you to check it out.