Two piggy banks with savings written on one and investment written on the other, to illustrate the article Invest or save? Find your winning strategy

In the fluctuating world of the modern economy, the question of whether it's wiser to invest or save remains as relevant as ever. Faced with a multitude of options such as property, cryptocurrencies, equities, or even the traditional Livret A savings account, this can be a complex decision. Choosing between generating a potentially higher return through investment or opting for the security of savings is a crucial step in securing your financial future. Understanding the nuances between these two approaches is fundamental to successfully navigating the world of financial investments.

This article proposes to delineate the clear differences between saving and investing, before diving into the specific advantages and potential disadvantages of each option. From investment choices such as SCPIs, property and rental investment, to savings vehicles such as PERs and employee savings, to exploring new financial frontiers via NFTs and bonds, we will guide you through the myriad possibilities to help you determine the ideal proportion between saving and investing. This journey will conclude with recommendations on the best savings and investment solutions for your financial profile, preparing you to build a winning strategy for the future.

The differences between saving and investing

Definition of savings

Savings are often seen as a cash reserve, not intended to grow immediately. It represents the part of income that is not consumed and can be motivated by the desire to finance a future project or to protect against the hazards of life. 10. For individuals, this generally translates into disposable income after consumer spending 10. Savings can take different forms, such as keeping money in a bank account or investing in low-risk products such as passbook savings accounts, which offer a known but relatively modest return in advance. 7.

Definition of investment

Unlike saving, investing is the acquisition of assets with the intention of generating added value over the long term. This involves taking a calculated risk in the hope of obtaining a return in the form of interest or capital gains. 12. Investments can be diversified across a range of financial products, such as equities, bonds or property, to spread risk and maximise the chances of making a profit. 12. Investing is therefore a proactive approach aimed at increasing wealth, and requires strategic thinking about risk and the investment horizon. 7.

Why the confusion between the two

The distinction between saving and investing can sometimes be confusing, partly because of the terminology used in the financial sector and the media. In French, l'épargne and l'investissement have very distinct meanings, but the English language often uses the term "investments" to refer to what are considered investments in French, thus helping to blur the lines between the two concepts. 11. Moreover, the decision on how much to save, how to invest savings and the performance of these investments depend not only on the saver but also on the way in which these funds are invested by economic players to create value. 11. This complexity underlines the importance of a clear understanding of the objectives and implications of each financial action to effectively navigate the world of personal finance.

Why choose savings?

Savings are seen by many as a safe and reliable way of putting money aside for the future. It plays a crucial role in financial planning, offering both security and accessibility. Here are some of the main reasons why choosing savings can be an advantageous strategy.

Security of capital

One of the major attractions of savings is the security of capital they offer. Unlike some riskier investments, money placed in savings options is generally protected from loss of value. 19. This feature is particularly important for those seeking to protect their wealth against market fluctuations or economic crises. The peace of mind of knowing that their capital is safe is reason enough for many to choose savings as their main financial strategy.

Availability of funds

Another significant reason to opt for savings is the availability of funds. The sums saved are generally accessible at any time, enabling savers to meet unforeseen expenses or seize opportunities without delay. 19. This liquidity is a considerable advantage, giving the flexibility to meet urgent financial needs without having to sell potentially more lucrative assets at an inopportune moment.

Low remuneration

Although savings offer security and availability of funds, they are often associated with relatively low returns compared with other, riskier types of investment. 19. This low rate of return is a direct result of the security it provides; as the risk is lower, so is the return. For investors, this means that although their capital is safe, it will not grow as quickly as if it were invested in riskier but potentially higher-yielding options.

In conclusion, choosing savings as your main financial strategy offers a number of advantages, particularly in terms of capital security and availability of funds. However, it is important to note that relatively low returns can limit the growth of wealth over the long term. Savers should therefore weigh up these factors carefully when planning their financial strategy for the future.

The disadvantages of excessive savings

Lack of transparency

When individuals choose to save their money at the bank, they are often unaware that their funds are being reinvested in a variety of projects, including controversial sectors such as fossil fuel extraction. This situation results from the intermediary role of commercial banks, which use the money deposited to finance projects, without depositors having any say in how it is used. The banks are only required to hold a small fraction of the money, determined by the reserve requirement set by the central bank. 23. This lack of transparency in the use of savings raises ethical questions and demonstrates a lack of control by savers over their own funds, resulting in indirect investment with no direct benefit for them. 23.

Impact of inflation

Inflation, which reflects a fall in the purchasing power of money, directly affects savers. With prices rising across the board, investments whose yield is lower than the rate of inflation generate no real gain and may even result in a loss of monetary value. This is particularly true of bonds and fixed-rate bond products, as well as euro funds invested mainly in bonds, where the average yield fails to cover inflation. 25. Despite a recent increase in the yield on certain savings accounts and the euro fund of life insurance policies, inflation remains higher than the interest rates offered, resulting in a loss of purchasing power for the sums invested in these vehicles. 26. This erosion of saved capital, exacerbated by inflation, underlines the importance of investing to protect money against currency devaluation. 27.

Why invest?

Investing is a way of tackling a number of financial challenges while seizing opportunities for growth. The reasons for investing are many and vary according to individual objectives, but they generally revolve around a few fundamental pillars.

Making your money work for you

Investing is essential if you want your money to grow. Unlike traditional savings investments, which often offer limited returns, investing can generate higher rates of return. This is particularly true in an environment of low interest rates, where 'safe' savings options offer low returns. 28. Investing in rental property, for example, is an attractive option, not only because of the potential rental income, but also because of the tax benefits it can offer. 28. However, it is crucial to be well-informed about the management fees and taxes associated with each type of investment in order to maximise your gains. 28.

Diversifying your investments

Diversification is the key to reducing risk and optimising the return on your investment portfolio. By spreading savings across different types of assets, investors can mitigate the negative impact of poor performance in one sector on their overall portfolio. 3132. This strategy smoothes the overall performance of investments over time by combining assets with low correlation 32. Unit-linked products, for example, offer a wide range of options for diversifying investments, from equities to bonds to property. 31. Diversification can also extend to investments in the real economy, such as private equity or crowdfunding, which offer attractive potential returns while helping to finance innovative or local projects. 31.

Contributing to the economy

Investing also means making a significant contribution to the economy. Whether by financing start-ups and SMEs through private equity or by supporting sustainable and responsible initiatives, investors play a crucial role in economic and social development. 30. Investment in renewable energies and the circular economy, for example, promotes sustainable growth and meets today's environmental challenges. 35. By choosing socially responsible investments, investors can have a positive impact on society while seeking to maximise their long-term returns. 30.

In short, investing offers not only the opportunity to make your money grow, but also to do so in a diversified and responsible way. However, investment choices must be guided by a considered strategy, taking into account personal objectives, risk aversion and the global economic outlook.

Investment risks

Yield variability

The return and risk of financial investments are inseparable, which means that investors cannot know the return of an investment in advance with any certainty. 37. This uncertainty is partly due to volatility, which measures changes in the price of financial securities such as shares, currencies and bonds. The more volatile a security, the more sensitive its price will be to information about the company or the market, leading to significant variations in its price. 38. Volatility is therefore a key indicator for understanding the risk associated with an investment. 3738. In addition, the economic and political environment can have a significant impact on share prices, affecting the outlook for returns. 40.

Risk of loss of capital

The risk of capital loss is a major concern for investors. On the stock market, no return can be guaranteed, and even over a 10-year period, equity investments carry a risk of loss. 39. SCPIs, which are made up of real estate assets, also present a risk of capital loss due to various factors such as the economic slowdown or inadequate management. 41. It is crucial for investors to understand that the value of their investment may decrease, resulting in a financial loss. 41. In addition, the risk indicator, based on a scale of 1 to 7, helps to assess the risk of losses linked to the product's future performance. This score combines the market risk, which is representative of the rises and falls observed in the past, and the credit risk, which is an estimate of the financial capacity of the institution guaranteeing the product. 42.

The ideal balance between savings and investment

Precautionary savings

Precautionary savings are the first step in managing your personal finances. It is intended to cover unforeseen expenses or emergencies, such as a car breakdown or unexpected medical expenses. It is advisable to save between 2 and 6 months' income in easily accessible instruments such as the Livret A or the Livret de développement durable et solidaire (LDDS), which offer immediate availability of funds with no risk of loss. 4445. This secure savings scheme gives you peace of mind in the face of everyday hazards.

Investment of surplus

Once you've secured precautionary savings, it's a good idea to consider investments for surplus savings to generate higher returns over the long term. Depending on your financial objectives, such as financing your children's education or preparing for retirement, higher-yielding investments with a calculated risk are recommended. 46. Options include property investments, equities, or diversified funds via life insurance, which offer tax advantages after several years and may be more resistant to inflation. 4647.

Balanced strategies

To balance your savings and investments effectively, it is essential to follow a strategy tailored to your personal situation. The 50/30/20 rule can be used as a guide to distribute your income in a balanced way: 50 % for essential expenses, 30 % for personal expenses and leisure, and 20 % dedicated to savings and investments. 48. Of these 20 %, the split between precautionary savings and investments can be adjusted according to your risk profile and long-term goals. Using budget management applications can also help you maintain this financial discipline. 48.

The best savings solutions

The savings solutions available on the market offer various advantages depending on the needs and objectives of savers. Among these solutions, bank savings books and euro fund life insurance stand out for their flexibility, security and potential returns.

Bankbooks

Passbook savings accounts are an attractive option for making your money grow in total security. They fall into two main categories: regulated savings accounts, such as Livret A, LDDS, LEP and Livret jeune, which are tax-exempt, and bank savings accounts, which are offered by banks on freely determined terms and are subject to tax.49. Bank passbooks offer immediate availability of funds, allowing savers to draw on their savings as and when they need to without penalty.49. What's more, they present no major risk of capital loss, making them particularly suitable for precautionary savings.49.

Online banks such as Fortuneo and BoursoBank offer savings accounts on attractive terms, often with no account fees and a free card.49. These passbooks can be used to supplement regulated savings passbooks, especially when the latter reach their ceiling or when more attractive interest rates are offered.49. The major advantages of bank passbooks include the flexibility of the deposit ceiling, the possibility of holding several passbooks and the guarantee of bank deposits in the event of the bank's failure.49.

Life insurance euro funds

Euro fund life insurance is another preferred savings solution for investors looking for both security and yield. Euro funds are mainly invested in low-risk assets such as bonds, offering a partial or total guarantee on the capital invested.52. The return on euro funds is generally stable and predictable, and the insurer may offer a guaranteed minimum rate of return.52. The interest generated by investments in euro funds is irrevocably acquired each year and added to the guaranteed capital, offering greater security for savers.53.

Life insurance policies with euro funds offer permanent liquidity, allowing partial or total withdrawals at any time without losing the capital guarantee.52. The advantageous tax treatment of life insurance, after eight years of ownership, is an additional advantage for savers.52. Despite a generally lower return compared with other investment vehicles, euro funds are still a good choice for those looking to secure their savings while enjoying a positive return.53.

In conclusion, bank savings books and euro fund life insurance are complementary savings solutions, offering a balance between security, availability and potential returns. The choice between these options will depend on the individual's financial objectives, risk tolerance and overall savings strategy.495253.

The best investment solutions

Property investments

Property investments offer a variety of options for those looking to diversify their portfolio. There are three main types of property investment: income property, traditional rental property, and paper-based property. SCPIs (real estate investment trusts), crowdfunding and SIICs (real estate investment trusts) represent accessible and comfortable options, with a low entry ticket and passive income thanks to delegated management, while providing better diversification and reducing the risks associated with direct ownership. 55. Choosing the right property investment depends on your personal objectives, whether you want to build wealth, generate additional income, or invest for a comfortable retirement. The SCPI stands out as the best investment in its category thanks to a minimum gross yield of 4% and simplified management for investors. 56. Property crowdfunding offers attractive returns, with entry tickets available from as little as €1,000, making property investment more affordable for the general public. 56.

Multi-support life insurance

Multi-support life insurance is a versatile option for investors, combining the security of euro funds with the higher return potential of units of account (UA). Unit-linked policies allow you to invest in a wide range of financial instruments, such as SICAVs, FCPs, equities and bonds. Diversification of investments within a multisupport contract can contribute to a higher potential return while managing the risk of capital loss. 59. Investors have the freedom to choose their investment vehicles according to their risk profile, allowing them to customise their investment strategy. 59. Multi-support contracts also offer the possibility of guided or advised management, suitable for novice investors or those who prefer to manage their portfolio independently. 58.

Investments in equities and other financial markets

Investing in the stock market offers the opportunity to participate actively in the real economy and contribute to the growth of companies. Individual shares, ETFs (Exchange Traded Funds) and bonds offer a variety of options for investing in the financial markets. ETFs, in particular, offer effective diversification by replicating the performance of stock market indices, sectors or asset classes, with low management fees. 63. Equities offer the potential for high returns but are associated with a greater risk of volatility 63. Bonds, on the other hand, offer a less risky investment option, generating periodic interest payments and repayment of the principal at maturity. 63. SCPIs enable investment in rental property without the constraints of direct management, offering a source of dividends and the possibility of capital appreciation. 63.

Conclusion

At the end of this in-depth exploration of the spheres of saving and investing, it is clear that finding the optimal balance between the two is essential to building a robust and sustainable financial strategy. The distinctions and nuances between saving and investing underline the importance of a nuanced understanding of the options available, allowing us to confidently navigate towards informed financial decisions. Informed decision-making in wealth management is crucial to meeting personal financial goals while adapting to market variability and global economic conditions.

The range of savings and investment options on offer, from bank passbooks and euro-fund life insurance to property investment and the financial markets, shows that a diversified approach can not only maximise returns but also contribute to the wider economy. Ultimately, selecting the best savings and investment solutions depends on individual risk tolerance, long-term goals and a willingness to engage with the dynamics of the economy - identifying and understanding these elements will guide a personalised strategy that balances the security of savings with the growth potential of investment.

FAQs

What is the difference between saving and investing?

Saving means putting money aside for short-term expenses such as emergencies, travel or buying furniture, while investing means allocating part of your income to long-term investments.

Which investment strategy is considered the best?

The safest investment strategy is one that aims to preserve capital. It is particularly suitable for families and retired people looking to supplement their income. This approach involves investing in low-risk financial products to ensure that capital maintains its value, outperforming inflation.

How do you invest €30,000 in 2024?

This question was not directly answered in the information provided.

What type of investment offers the best return?

Investing in the stock market is often considered to be the most profitable investment. With a diversified portfolio of shares, it is possible to achieve an average return of around 8.5% per year. However, it is important to note that the stock market is subject to fluctuations, which is its main drawback.

References

[1] – https://www.inter-invest.fr/guides/epargne/epargner-ou-investir
[2] – https://plenit-finances.fr/difference-entre-economiser-epargner-investir/
[3] – https://www.monpetitplacement.fr/fr/5-minutes-pour-comprendre-l-investissement/epargner-vs-investir
[4] – https://www.mesquestionsdargent.fr/epargne-et-placements/pourquoi-epargner
[5] – https://www.ammc.ma/fr/espace-epargnants/difference-entre-epargne-et-investissement
[6] – https://www.maxicours.com/se/cours/epargne-investissement-et-croissance-economique/
[7] – https://blog.yomoni.fr/difference-epargner-investir/
[8] – https://www.ammc.ma/fr/espace-epargnants/difference-entre-epargne-et-investissement
[9] – https://plenit-finances.fr/difference-entre-economiser-epargner-investir/
[10] – https://or-investissement.fr/blog/lepargne-et-l-investissement-quelle-difference–n961
[11] – https://blog.yomoni.fr/les-differences-entre-epargne-placements-et-investissements/
[12] – https://plenit-finances.fr/difference-entre-economiser-epargner-investir/
[13] – https://www.maif.fr/epargne-patrimoine/guide-constituer-patrimoine/epargne-de-precaution
[14] – https://www.mesquestionsdargent.fr/epargne-et-placements/pourquoi-epargner
[15] – https://www.cashbee.fr/blog/lepargne-de-precaution-pourquoi-et-comment
[16] – https://www.maif.fr/epargne-patrimoine/guide-assurance-vie/assurance-vie-disponibilite-des-placements
[17] – https://www.economie.gouv.fr/particuliers/produits-epargne
[18] – https://www.mesquestionsdargent.fr/epargne-et-placements/pourquoi-epargner
[19] – https://www.ouest-france.fr/economie/budget/epargne-pourquoi-les-taux-des-livrets-bancaires-des-grandes-banques-sont-ils-si-faibles-ee46f448-039e-11ef-b06d-1aa5699c630f
[20] – https://www.lafinancepourtous.com/pratique/vie-pro/epargne-salariale-2/l-epargne-salariale-a-grands-traits/quel-est-linteret-pour-le-salarie/
[21] – https://www.pwc.fr/fr/decryptages/epargne-des-francais-un-potentiel-non-exploite.html
[22] – https://www.pwc.fr/fr/decryptages/epargne-des-francais-un-potentiel-non-exploite.html
[23] – https://blog.goodvest.fr/articles/faut-il-investir-ou-epargner
[24] – https://www.latribune.fr/opinions/tribunes/quand-l-exces-d-epargne-provoque-des-crises-financieres-539269.html
[25] – https://www.generali.fr/actu/inflation-proteger-epargne/
[26] – https://www.boursorama.com/patrimoine/actualites/comment-proteger-son-epargne-face-a-l-inflation-74bcd86b9df4bbcfee7fa5f1ca8a7a10
[27] – https://www.climb.fr/guides/investir-inflation/consequences-inflation-epargne
[28] – https://www.selexium.com/faq/fructifier-son-argent/
[29] – https://www.meilleurtaux.com/pouvoir-achat/le-guide-du-pouvoir-d-achat/ou-placer-son-argent.html
[30] – https://www.primonial.com/placer-son-argent-pour-investir
[31] – https://www.boursorama.com/patrimoine/fiches-pratiques/pourquoi-diversifier-ses-placements-est-la-regle-d-or-des-investisseurs-c452845b1bc1014d637ffaf52e1bbce1
[32] – https://www.mifassur.com/dossier-epargne/pourquoi-est-il-necessaire-de-diversifier-ses-placements
[33] – https://groupe-quintesens.fr/actualite/strategie-depargne-pourquoi-diversifier-ses-placements
[34] – https://www.pwc.fr/fr/decryptages/investissement-des-entreprises-lame-de-fond-de-la-croissance-francaise.html
[35] – https://www.caissedesdepots.fr/fileadmin/PDF/Rapports_et_etudes/fonds_d_epargne/Conjoncture_46.pdf
[36] – https://www.senat.fr/rap/r02-035/r02-0356.html
[37] – https://www.amf-france.org/fr/espace-epargnants/savoir-bien-investir/cadrer-son-projet/risques-et-rendements-des-placements
[38] – https://www.lafinancepourtous.com/decryptages/finance-perso/epargne-et-placement/le-couple-rendement-risque/
[39] – https://www.amf-france.org/fr/espace-epargnants/savoir-bien-investir/cadrer-son-projet/rendement-et-risque-des-placements-en-actions-0
[40] – https://www.lafinancepourtous.com/decryptages/marches-financiers/produits-financiers/actions-2/les-risques-associes-aux-actions/le-risque-de-perte-en-capital/
[41] – https://www.iroko.eu/blog/scpi-risque-de-perte-en-capital
[42] – https://www.amf-france.org/fr/espace-epargnants/savoir-bien-investir/cadrer-son-projet/risques-et-rendements-des-placements/document-dinformations-cles-comprendre-linformation-sur-le-risque-du-placement
[43] – https://avenuedesinvestisseurs.fr/introduction-a-lepargne-et-aux-placements/bien-debuter/
[44] – https://www.fortuneo.fr/blog/comment-se-constituer-une-epargne-de-precaution-574
[45] – https://www.maif.fr/epargne-patrimoine/guide-constituer-patrimoine/epargne-de-precaution
[46] – https://avenuedesinvestisseurs.fr/introduction-a-lepargne-et-aux-placements/bien-debuter/
[47] – https://www.fortuneo.fr/blog/to-do-se-construire-une-strategie-d-epargne-539
[48] – https://www.meilleurescpi.com/conseils/decouvrez-la-regle-des-50-30-20-pour-une-gestion-budgetaire-reussie/
[49] – https://www.moneyvox.fr/livret/
[50] – https://placement.meilleurtaux.com/livret-epargne/meilleur-livret-epargne.html
[51] – https://www.cafedupatrimoine.com/archive/article/livrets-boostes-prolongations
[52] – https://www.corum.fr/guide-assurance-vie/points-forts-points-faibles-fonds-euros-assurance-vie
[53] – https://www.ag2rlamondiale.fr/epargne/placements-financiers/conseil-qu-est-ce-que-le-fonds-en-euros
[54] – https://placement.meilleurtaux.com/assurance-vie/fonds-en-euros/
[55] – https://avenuedesinvestisseurs.fr/investissement-immobilier/
[56] – https://www.vousfinancer.com/credit-immobilier/guides/achat-immobilier/meilleur-investissement
[57] – https://www.lybox.fr/guide-investissement-immobilier
[58] – https://www.maif.fr/epargne-patrimoine/guide-assurance-vie/diversification-assurance-vie
[59] – https://placement.meilleurtaux.com/assurance-vie/meilleure-assurance-vie/assurance-vie-multisupport.html
[60] – https://www.mifassur.com/dossier-epargne/pourquoi-est-il-necessaire-de-diversifier-ses-placements
[61] – https://selectra.info/finance/guides/bourse
[62] – https://placement.meilleurtaux.com/bourse/investir-en-bourse.html
[63] – https://activeseed.fr/reflexions/guide-de-linvestissement/investissement-responsable/investir-en-tant-que-debutant-comment-maximiser-les-rendements-et-minimiser-les-risques/
[64] – https://www.lumo-france.com/blog/2023/08/30/epargner-ou-investir-quelle-strategie-financiere-vous-convient-le-mieux
[65] – https://www.epsor.fr/blog/meilleure-strategie-epargne
[66] – https://www.monpetitplacement.fr/fr/5-minutes-pour-comprendre-l-investissement/pourquoi-investir
[67] – https://www.monpetitplacement.fr/fr/blog/les-conseils-de-base-en-investissement/epargne-placement-et-investissement-quelles-differences
[68] – https://www.inter-invest.fr/guides/epargne/epargner-ou-investir
[69] – https://www.gerezmieuxvotreargent.ca/chemin-dapprentissage/economie-dargent/epargner-ou-investir/