Ideal-investor.fr. - How do you begin when you want to start investing?
Matthieu Louvet. - The answer can be very different from one person to another depending on their goals and risk tolerance. Does he/she want to purchase a primary residence, aim towards sustainable investment, could he/she consider significant losses with his/her investments... Once the individual has answered a set of such questions, he/she will be able to think about a strategy and consider the most suitable investments.
To build one's wealth, there are 3 "building blocks":
- Short-term investments, which I call the "precautionary pot": we are talking here about savings that can be mobilized at any time. It's the base that will then enable medium and long-term investing without having to pull the invested money too soon.
- Mid-term investments, the "project pot": we will invest over several years to seek a bit more returns and risk, but while retaining a liquidity horizon of 3 - 5 years: for instance, to prepare for a real estate purchase.
- Long-term investments: these are the ones that will serve to seek performance through the stock market, private equity [investment in non-listed companies, ED], or generate returns through private debt for example (bond funds...).
If we look more broadly, I think the 2 major pillars remain financial investment and physical real estate to ensure some security, especially by buying your primary residence.
On your Youtube channel, you often talk about ETFs as a good option to start investing in the stock market and diversify your portfolio. What advantages do you see in them?
ETFs, or "Exchange Traded Funds", are mostly baskets of stocks or bonds. There are "active" ETFs (a manager selects the stocks inside) and "passive" ETFs, which replicate the performance of an index. At Investing, we are generally convinced by "passives" for several reasons.
Let's take the example of a "MSCI World ETF": it's a basket of nearly 1600 companies from 23 developed countries. In a single transaction, one can diversify their portfolio better than when they choose their stocks independently. It should be understood that as an individual, it's very tough to perform better than an ETF by selecting your own stocks. The SPIVA study (S&P Indices versus Active), which compares the performances of active and passive funds, shows that less than 10% of professionals manage to perform better than the flagship index of the United States, the S&P 500. With a simple passive ETF, you therefore place yourself in the top 10% of investors in the long term. This allows you to avoid relying on a manager's decisions who may be wrong, or on your own decisions that will be tainted by cognitive biases and will have a high chance of underperforming compared to the market.
An ETF can also be beneficial from a tax perspective: some are eligible for the PEA, or proposed in certain life insurance contracts and PER. Others reinvest the interest generated, which avoids being taxed on dividends.
Many entities now offer the opportunity to invest through robo-advisors, which automatically select financial products based on investor profiles and goals. Is this the future?
I have a positive view on robo-advisors: they are very useful for people who want to delegate their investments. Some players also offer options like life insurance and the PER, or themes like sustainable investing. The drawback, however, are the management fees to be paid, even if these are reasonable compared to other delegated management options. However, these techniques also close the door to other products: for instance, few players currently offer a comprehensive range of products, including SCPI, bond funds, private equity, ISR investments [Socially Responsible Investments, editor's note], etc... So we always come back to the same point: it is necessary to diversify your actors to diversify your investments.
The topic of sustainable investment is increasingly present, but tends to become a controversial issue. How do you go about investing whilst maintaining certain convictions?
The subject is very complex. When you invest in the stock market, you must understand that you are not directly financing a company. If you buy a share, you buy it from someone who resells it. As an individual, we are so diluted in the mass of shareholders that our impact is, in the end, very little.
If the goal is for your savings to be useful and directly impact the real economy, it's better to finance small and medium-sized enterprises that work in social or sustainable development, for example via debt. Savings then have much more weight than on the stock market, which remains a secondary market. Crowdfunding platforms offer this type of bond projects: renewable energy, solidarity agriculture... The downside remains at the level of risk and exit. The "SRI" SCPIs are also interesting. They buy sustainable real estate or a building park that they will renovate while improving the DPE.But it remains difficult to have a sufficiently diversified portfolio if you only invest in unlisted securities. Especially since this type of investment does not necessarily correspond to all profiles.
In terms of financial investment, what do you advise against for beginners?
One should avoid the promise of quick and easy money that can be found on social networks, as there are many risks involved. An AMF study [Financial Markets Authority, ed.] conducted on 1,600 individual accounts showed that 89% of people who invested in CFDs or Forex lost money. Generally, the products offered are more like gambling than investing.
I also advise against betting the majority of your finances on a single type of asset. Sometimes, some investors have more than 50% of their wealth in cryptocurrencies, especially the younger ones. It is essential to diversify your investments.
Another bias is to be content with the advice of your banker, who is sometimes more of a salesperson than a counselor. From the saver's point of view, the goal is not to subscribe to products that sometimes have too many fees without real justification, and which underperform the market. We often meet people who have opened a life insurance policy with their traditional bank and end up with limited performance, high fees and a choice of investments disconnected from their profile and goals. For example, a thirty-year-old with only cash and few stocks when they want to build capital for their future. This is unfortunate.
Finally, for investors who are starting to dabble in the stock market, one error that frequently occurs is the familiarity bias. They may invest only in well-known stocks, which is reassuring but cuts them off from other interesting options. Or they choose shares of companies with which they have an affinity, for example, a computer engineer who owns shares of their IT company. The risk is that the sector or company may run into troubles, in which case both their job and investment can be jeopardized at the same time.
