Having extra cash sitting in your french current account and concerned about inflation eating it slowly? Not willing to invest in risky options and wondering How grow my money in France with no risk?
You are right to be concerned as you are slowly losing capital due to high inflation rates. 100€ of today will not buy same products and services of tomorrow.
But do not worry! We will cover in this blog some ideas on how to make your money grow with the minimum risk possible…
Table of Contents
When does it make sense to limit risk?
When you have a low risk-tolerance profile. It means that you will not be able to sleep at night if your capital is loosing important amount of value. Your mental health is way more important than money!
When you have a short term project. You do not want to put your capital at risk and jeopardize your project in case of a market / economy downturn. Do not let an economic crisis stop you from buying this dream house next to the beach 😉
The economic context. Even though nobody cannot predict how the economy will evolve in the future, you may consider that the conditions are not appropriate at the moment to invest and put your capital at risk. Patient is a good quality for investors.
Risk and returns are correlated. Remember that if you do not take risk, you should not expect high returns neither. Hence, limiting risk to all your available capital may be risky as well for your future. Nobody has become rich by keeping their money in savings accounts.
Is it possible to grow my money with no risk in France?
Even one of the safest investment options, like government bonds, has some risk. We have seen in the past some countries defaulting and not being able to pay their debt (ex: Argentina, Greece, …). The french government bonds are rated ‘AA’, which means is pretty much safe, but not at 100%.
Similarly, gold may seen safe as well, but if you keep lingots at home you’ve better have a good safety lock. Banks can be robbed as well. But normally there are insurances and it happens very rarely. But still carries some risk.
However, if you compare savings accounts, bonds, gold and similar low-risk allocations to stocks, crypto, private equity the risk gap is quite important. With the later, there is high volatility and you may lose all your capital.
So how to grow my money In France with no risk? Fortunately, there are several safe ways to grow your capital with a very minimal risk. Let’s see in the next section what are those options.
Saving options in France to grow your money with no risk
Special savings accounts
Let’s start with the basics: Government special savings accounts like the famous ‘Livret A‘ and ‘LDDS’. Both are fully backed by french government, liquid, tax free, and earns an interesting rate (3% as per December 2023). Certain banks propose as well high yield savings accounts. We invite you to read or blog about ‘Savings accounts in France‘ to understand more about it.
Certificate of deposit
Second in list, would be the fixed rate certificate of deposit (‘Comptes a terme’). In France is possible to lock an amount of money with your bank, with a predefined interest rate (known in advance), during a given period of time. You can expect similar returns as the special savings accounts. However, interest earned will be subject to 30% flax tax rate and you may be asked for an important minimum amount to invest. As example, during early 2024 BoursoBank proposes 3,5% (before taxes) for 18 month (5k€ min. amount).
Investment bonds ‘Fonds Euro’
Third place we have the classic ‘Fonds Euro’ or bond funds invested within an ‘Assurance Vie‘ wrapper. The capital is guaranteed and its performance is close to the special savings account but depends on your contract. You can benefit from income tax exempt and prepare your inheritage. Its downside will be about high fees (entry, annual maintenance, transfer, exit…) that can erode interests earnt.
Investment options with a low risk but with grow potential in France?
As for governments, companies can issue debt to fund their operations. They are rated as well from AAA, AA, A, BBB, BB… down to D. The highest, the less risk. Here a link for more definitions from Fitch, one of the most famous rating organizations. It could be a good option to invest in the short – mid term and earn more than the 3% of the ‘Livret A’ but of course, with a bit more of risk (no less than BBB seems reasonable).
Even though its price can fluctuate, its volatility is quite low and it protects your capital during crisis. Gold has performed between January 1971 and December 2022 around 7.78% of annual returns. You can buy physical gold (lingots, coins) and keep it safe at home, or certificates (kept physically by a bank) like Invesco Physical Gold A code IE00B579F325 (not an investment advice, do your own research).
Structured financial products
This investment vehicle combines bonds, stocks and complex financial engineering options. It promises capital protection (till certain limits) and coupons (rates almost double compared to Livret A). The advantage is the visibility it provides and low volatility. In the other hand, there could be complex conditions to exit and get your capital and interest back.
Our own experience with low risk investments in France
During the very first years after our arrival in France, we used to be very conservative and kept most of our capital in classic savings accounts or current accounts. Only after several years, we have learnt all other possibilities available to us and we regret not having taken advantage of them before.
Then, we have open ‘Livret A‘, and ‘LDDS‘ where we keep our ’emergency fund’ for special expenses. In addition, we kept for several years a ‘PEL‘ account with an interesting 2,5% rate, but we closed it last year as not competitive anymore in front of a 6% inflation rate.
We have tried structured products in the past and managed to earn more than inflation rate. However, in order to get our money back it was conditioned to the stock index value reaching a certain level on an specific date during the year. Else, we have to wait again 1 more year.
From a diversification point of view, we have started to invest during 2023 in gold certificate through our broker account (Degiro) and private debt / obligations within our Corum ‘Assurance Vie’. We expect from both investments a return a bit higher than inflation rate.
- Keeping all your capital allocated at 'zero risk' products means low return return rates as well. No risk, no gain.
- There are some interesting opportunities to fight inflation while still keeping risk limited
Do not forget to leave your comment below and contact us for more exchanges. We can put you in contact with certified financial advisors if needed.
Please do you own research and do not make any investment decision solely in what you read from this blog. Remember that we are just sharing our own experience based in our investment criteria, that might be different than yours.
All the best.