Wealth Management: Should You Favor Financials or Real Estate?

Risk assessment, expected return, diversification… It is sometimes difficult to choose the best composition of one's assets and to decide on which type of investment to concentrate.

Wealth Management: Should You Favor Financials or Real Estate?

Risk assessment, expected return, diversification… It is sometimes difficult to choose the best composition of one's assets and to decide on which type of investment to concentrate. Here are some valuable tips.

The "financial pocket" includes three asset classes. Each one having its own specificities:

- monetary supports, first, generally refer to investments deemed to be risk-free, in which the saver is certain to recover at least the capital invested. These are, for example, bank books (passbook A, LDD, CEL, term account, etc.), the counterpart being relatively low rates of return.

- bond funds, then, consist of bonds, these negotiable debt securities issued by companies or States in order to finance themselves on the markets. The main risk of this investment: the rate which can induce a drop in the current value and, de facto, difficulties for resale. To overcome this danger, it is better to invest in the medium and long term, and go through life insurance contracts.

- last class of assets: equity funds. By acquiring shares, the investor buys a fraction of the capital of a company, which gives him both a right to dividends and a right to vote at general meetings. This type of investment is considered riskier because it depends on various factors such as the health of a company, its growth prospects and economic conditions.

The stone remains one of the favorite investments of the French. Reputed to be safe, real estate allows you to enrich a heritage that you can pass on to your children, but also to generate additional income at the time of retirement. In addition to the acquisition of a main home, there are several ways to develop your "real estate pocket". Especially with rental real estate, particularly accessible since borrowing rates have fallen. Investing in rental real estate can be done without necessarily buying a home directly. Indeed, for a few hundred euros, it is possible to acquire shares in a real estate investment company (SCPI) and thus pool risks with other buyers while discharging any management of the property. A variant close to the SCPI, the Real Estate Collective Investment Scheme (OPCI) is a more flexible and liquid investment, which can be taken out as part of life insurance.

There are therefore many differences between financial and real estate investments, as well as between assets placed in the short, medium or long term. In general, there is no ideal distribution of wealth. It all depends on the age of the saver, his family situation, his projects or his degree of risk aversion or not.

Of course, it is important to diversify your portfolio to protect yourself against any loss that would be too heavy for your personal assets. But the choices made between such and such type of investment must depend above all on the situation of the investor. We must not forget that a heritage is built throughout a lifetime, and it may happen that certain investments are more judicious or opportune at a given moment.

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