ETF ownership in France is increasing, with 8% of investors holding these products, compared to 23% for cryptocurrencies. BlackRock predicts a 110% rise in ETF investors over the next year, driven by expanded digital platforms and life insurance options that incorporate ETFs. These products offer lower fees and potentially high returns, especially from successful indexes like the Nasdaq. However, investors should prioritize diversification and carefully select ETFs to maximize benefits and minimize risks.
In France, the number of investors utilizing ETFs (Exchange-Traded Funds) is growing, despite it still being a minority. A recent report from asset management firm BlackRock reveals that only 8% of French investors reported owning these investment products this year, which is significantly lower than the 23% of individuals who have included cryptocurrencies in their portfolios. Nevertheless, France is expected to experience a remarkable surge in ETF adoption, with BlackRock estimating an increase of 110% over the next year, positioning it as a leader in Europe.
The expansion of ETFs in France is attributed to the rise of digital investment platforms such as Trade Republic, eToro, and Plum, which have become popular among 73% of ETF investors. These platforms allow users to invest in trackers through a straightforward securities account. Moreover, traditional savings options like life insurance are increasingly integrating ETFs; as Ivana Davau, BlackRock’s Head of Digital Distribution for France, Belgium, and Luxembourg, notes, “Today, more than half of life insurance contracts include at least one ETF, a figure that has doubled from 2020 to 2023.”
Maximizing Benefits: Life Insurance and Low-Cost ETFs
The combination of life insurance and ETFs offers significant advantages. Investors can leverage the tax benefits and inheritance perks of life insurance while enjoying the cost-effectiveness of ETFs, which track the performance of various indices or assets like gold or cryptocurrency. Investing in ETFs typically incurs lower fees, averaging 0.33% for life insurance policies, compared to a higher average of 1.72% for traditional equity funds, where a manager handles the investments.
Additionally, ETFs have the potential to yield impressive returns. According to the Good Value for Money website, the five top-performing ETFs in life insurance generated returns between 50% and 112% in 2023. This is largely driven by their ties to the booming Nasdaq index, especially with companies like Nvidia, which saw its stock price skyrocket nearly 240% during the same year.
Diversification is Key for ETF Investors
Investing in a single index can expose you to significant volatility, with potential drastic fluctuations in performance year over year. The solution lies in diversification. By selecting ETFs that cover various assets, sectors, or regions, you can effectively manage risk. It’s advisable to handpick multiple ETFs for your portfolio in a self-managed plan. However, many life insurance contracts may offer a limited selection, with insurers typically listing one ETF per geographical area, meaning investors may not access all available ETFs on a single index, as noted by Olivier Malteste, Investment Director at Yomoni.
Alternatively, consider investing in a single ETF that provides broad diversification, such as the “MSCI World” ETF (like those offered by Amundi), which tracks the performance of around 1,500 of the largest companies worldwide across all sectors. While this is a great starting point, it’s imperative to compare different “MSCI World” options since not all are cost-effective or provide accurate performance replication. According to Olivier Malteste, “Although ETFs appear simple to evaluate, the variety available can greatly impact your investment. Factors like liquidity, replication quality, and tax implications are essential to consider.”
Finally, you have the option to choose a managed strategy with a life insurance provider that offers a diverse range of ETFs. While this may incur higher fees compared to a self-directed approach, it can help you avoid poor investment choices that might adversely affect your long-term savings.