Inflation has been falling for several months, but it has not yet disappeared. Here are 7 investments to protect your savings against the rising cost of living in 2024.
In recent months, inflation has (finally) slowed down. After a peak 7.3% in February 2023, the price surge slowed 3.7% last December. And barring exceptional events, this decline is expected to continue in 2024.
According to the latest projections from INSEE, price increases are expected to slow to 2.6% in June 2024 over one year. For its part, the Banque de France forecast that inflation would settle at 2.5% in 2024 after an average of 5.7% in 2023.
However, other experts are less optimistic. This is particularly the case of Patrick Artus, economic advisor to Natixis, for whom inflation should be established 3.4% annual average, as reported by our colleagues from Echoes.
If these forecasts are confirmed, certain investments risk again showing a negative real rate in 2024. In other words, the net tax returns on these vehicles will not be high enough to protect you against rising prices.
We can, for example, cite the Housing Savings Plan, the remuneration of which has nevertheless increased by 0.25 points on January 1, 2024. Because despite this revaluation, the PELs opened in 2024 will only bring in 2.25% (raw). That is significantly less than inflation.
PEL 2.25%: opening or reopening a home savings plan, is it really worth it?
Conversely, other investments are capable of beating inflation. These savings vehicles bring in (at least) 3% and should therefore allow you to protect your purchasing power, or even improve it, despite rising prices.
1. The popular savings account (LEP)
Zero fees. Zero taxes. Zero risk. And zero delay in accessing your funds. On paper, the LEP really has it all. But if this booklet is getting a lot of attention at the moment, it is mainly because of its high yield.
And for good reason: the LEP reports 6% per year, or twice as much as the Livret A. But not for long. Because the interest rate on this booklet is revised once per semester based on the average monthly inflation observed over the last 6 months.
However, since inflation has fallen in previous months, the LEP rate should also decrease to return to 4.1% (net) from February 1. Despite this slight decline, the LEP remains to this day the most profitable risk-free savings product. And by far.
Since October 1st, the ceiling of this regulation booklet has been raised 10,000 euros (compared to 7700 euros previously). However, to be eligible, your reference tax income (RFR) must not exceed 22419 euros for a single person.
Booklet A, LEP… Will my 2023 interests produce new ones even if I exceed the ceiling?
And Booklet A, in all that?
In 2023, the Livret A and the LDDS will cause you to lose purchasing power. Because their rate has passed 3% on February 1, 2023. Not enough to cover inflation, which would have reached 4.9% on annual average over this period, according to the latest INSEE estimates.
The real return on the French’s favorite savings account could, however, return to the green for the first time since 2020, because its rate is blocked at 3% until February 1, 2025, while inflation is expected between 2.5% And 3.4% for 2024.
Bank savings accounts, on the other hand, should still offer a negative real return in 2024, despite promotional rates of up to 5.5% for 3 months, in particular because the interest generated by these savings accounts is subject to the flat tax of 30%.
2. Structural products
After several years in the shadows, structured products, also called formula funds, are now making a comeback. And for good reason: these funds offer, under certain conditions, returns that can range from 5 12% per year.
Another strong point of this investment: Structured products offer the saver a capital guarantee, which can be total or partial, depending on the case, explains Stphane van Huffel, co-founder of the Netinvestment platform.
The M Rendement 11 fund, for example, offers you a return of 7.5% per year for a period of 1 to 10 years. It is based on the index Edge ESG Transatlantic SDG 50 EW Decrement 50 Points GTR Series 2 calculation of gross dividends reinvested and reduced by 50 points per year.
3 criteria to understand before purchasing a structured product
If the latter does not fall by more than 10% compared to its initial level, you receive a coupon of 7.5% per year. On the other hand, if the index records a drop of 10 50%you don’t win anything, but you get your initial investment back.
And if the decline exceeds 50%? In this case, you lose the equivalent of the fall in the index. Caution therefore remains in order. Especially since this investment is accompanied by a liquidity risk, since your savings are immobilized for the entire life of the fund.
Savings: is it in your interest to bet on this investment which can yield more than 12%?
3. Euro funds
After a long descent into hell, life insurance rates are heading back in the right direction. Average returns on euro funds are expected to rise by 1.91% in 2022 2.5% in 2023, with a few bites expected 4% even even 4.5%.
2023 life insurance rates, from best to worst
Among the contracts which should outperform inflation, we can already name Garance, which provides a remuneration of 3.5% net of management fees. After social contributions, the net remuneration for the year 2023 will therefore be almost 2.9%.
Other insurers are expected to unveil their new rates in the coming days.
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4. Rental real estate
The year 2023 has been eventful for stone-paper. More than fifteen real estate investment companies (SCPI) representing more than 30% of the market in terms of capitalization have lowered the price of their shares.
Because as a reminder, the price of shares in an SCPI must correspond more or less 10% of the reconstitution value of the portfolio if all the assets it holds were to be sold. However, the real estate sector experienced significant turbulence in 2023.
In detail, prices fell by 17% in the office and logistics sector and 12% for shopping centers, according to Natixis experts, which has mechanically lowered the valuation of most SCPIs.
However, stone paper retains part of its appeal in 2024, with expected returns 7% at Iroko Zen, and 7.5% at Remake Live. Especially since the rents received by these companies are indexed to indices which take into account inflation.
In other words, if the cost of living increases, the income from your SCPI also increases. At least, in theory, since this mechanism is not infallible, particularly if the State intervenes to cap rents, as is the case from the first half of 2023 until March 31, 2024.
SCPI: What yield? How to invest? Our advices
5. Inflation-indexed bonds (OII)
This is a more confidential placement. However, it is difficult not to talk to you about inflation-indexed bonds (OII) as they are adapted to the situation. These debt securities are aimed at investors who wish to protect themselves against rising prices.
From 1998, the French State began issuing comparable Treasury bonds indexed to the consumer price index in France (OATi) or in Europe (OATi). The main advantage is that if prices rise, your returns also increase.
But this investment is not without risk. Because if inflation continues to fall, your returns will follow suit. In the absence of a significant increase in prices, inflation-indexed bonds yield less than a traditional bond, warns Philippe Crevel.
Savings: in the face of inflation, should you buy bonds?
6. Precious metals
Gold through the centuries, crises and wars. But is it an effective investment against inflation? In theory yes. In periods of inflation, the value of the currency falls, recalls Jean-Franois Faure, founder of AuCoffre.com.
Result? To buy the same quantity of gold, you need more money. And this is reflected in the courses. After a low point 1600 dollars per ounce in 2022, the yellow metal beat its previous record to reach 2135 dollars last December 4.
However, should you convert your euros into bars? Nothing is less certain. Because in addition to inflation, several factors are likely to impact the price of gold, such as the global political situation and the policy of central banks.
Without forgetting that gold does not generate interest. In the event of a change in prices, you can find yourself stuck with your golden mattress, indicates Philippe Crevel, while your money could be working on a Livret A or a euro fund.
7. Private equity
Private equity, or investment capital, consists of taking a stake in the capital of companies not listed on the stock exchange in the hope of realizing a capital gain when these shares are resold on a secondary market.
Previously reserved for institutional investors, this investment has become more popular in recent years. The entry ticket has fallen, and several online life insurance contracts now offer investment in this asset class.
As for yields, it’s difficult to do better. Over the last 15 years, private equity has generated an average return on investment of 12.1% per year, according to the France Invest association, twice as good as the CAC40, which is the flagship stock market index in Paris.
However, this investment is extremely risky. Near 90% startups go bankrupt, including 10% from the first year, recalls Claude Calmon, founder of the Calmon Partners firm. Another downside: your funds are often blocked for 8 to 10 years.
Savings: is it in your interest to bet on this investment which can yield more than 12%?