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ETFs (trackers) are gaining ground in life insurance, offering an attractive option to investors. However, to choose them wisely, be sure not to just look at their performance and to diversify your portfolio.
© maurice norbert
– Which ETFs should you bet on in life insurance?
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In France, ETF ownership remains in the minority, but is on the rise. According to a recent study by asset manager BlackRock, 8% French investors declared this year that they held one of these financial products, index funds also known as “trackers”. This is three times less than for cryptocurrencies, for example, which today appear in the portfolio of 23% of respondents. Starting from a lower level, however, it is France which should experience, in Europe, the strongest increase in ETF investors in the next 12 months, with a increase estimated at 110% par BlackRock.
It must be said that the ETF offering has also expanded in recent years in France, particularly through the emergence of digital platforms (Trade Republic, eToro, Plum, etc.) favored by 73% of ETF investors in France. , and which allow you to invest in trackers through a securities account. But a more “traditional” savings product like life insurance has also opened up to ETFs: “Today, more than half of life insurance contracts include at least one, a proportion which has doubled between 2020 and 2023”points out Ivana Davau, head of digital distribution France, Belgium and Luxembourg at BlackRock.
Combine the advantages of life insurance and the reduced fees of ETFs
It is therefore possible to combine the best of both worlds by combining the advantages – tax and inheritance – of life insurance and those specific to ETFs. As a reminder, these financial instruments consist of replicating the performance of an index (the CAC 40, the S&P 500, etc.) or an asset (the price of gold, for example, or Bitcoin). An “automatic” method which is less expensive for the saver than investing in an equity fund via the units of account (UC) in their contract, because this fund will be managed by a manager who must be remunerated. According to the firm Facts & Figures, the ETFs available in life insurance thus display on average 0.33% fixed costsagainst 1,72% for “classic” equity funds.
As a bonus, ETFs can provide strong returns for your contract. According to the Good Value for Money site, the 5 best ETFs accessible in life insurance showed performances including between 50% and… 112% in 2023 (see our table). Nothing surprising in reality, because four of these ETFs are exposed to the same index: the Nasdaq, the American technology stock exchange, which showed insolent health in 2023: that year, the share price of the manufacturer of Nvidia electronic chips, for example, exploded by almost 240%, and the entire index by 45%. For now, since January 1, 2024, the Nasdaq has however gained “only” 18%.
Be careful to diversify your ETF basket
Exposing yourself to only one index on an asset as volatile as stocks also means taking the risk of seeing your performance go on a roller coaster ride from one year to the next. To avoid it, always use the same key word: la diversification. Selecting ETFs exposed to different assets, countries or sectors will allow you to minimize risk. To do this, you can, with free management, choose a variety of ETFs to place in your portfolio. Issue : “Savers can be blocked by the ETFs referenced in their life insurance contract. In general, an insurer will reference an ETF by geographic region, and not necessarily all the ETFs available on the same index.notes Olivier Malteste, Director of Investments at Yomoni.
Also read: What is an active ETF, this new investment arriving in France?
No matter, it will then suffice to choose a single ETF but very diversified, of the “MSCI world” type (like the one marketed by Amundi, widely distributed in life insurance, see our table), which can replicate the performance of 1 500 largest companies on the planet, all countries and sectors combined. A good start, but you must nevertheless be vigilant, because the range of “MSCI world” ETFs is vast, and the one offered to you by your insurer will perhaps not be the least charged in fees, nor the one which will replicate the most faithfully the performance of the selected companies. “The ETF is a simple product, so it seems like you can take any product without much impact. But there are many, and many on the same index. It requires a little time and knowledge to look at other important criteria (liquidity, quality of replication, tax regime, etc.)”recalls Olivier Malteste.
Also, in addition to free management, it is also possible to opt for managed management with a life insurance distributor with a wide range of ETFs. A method which will cost you more in fees than selecting your trackers yourself, but which can also prevent you from making a choice that is detrimental to your long-term savings.
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