05/02/2019
Tips for a first safe investment in branch 23
Everyone dreams of a high return on their savings. With the extremely low interest rates today, this is unfortunately not very realistic. Many people are therefore thinking of investing their savings in products linked to the stock market, such as shares, funds, branch 23 insurance, etc. Here are some tips for investing safely and wisely in branch 23 insurance products, whose return depends on the performance of one or more underlying investment funds.
- AssurMiFID (Markets in Financial Instruments Directive) legislation requires insurance intermediaries (brokers or agents) to establish an inventory of your needs and define your investor profile. In principle, they can only offer products which correspond to this profile. For example, you may have a defensive profile and therefore do not want to take a lot of risks. Branch 23 insurance has a given risk category: from 1 (low risk) to 7 (high risk). If you have a defensive profile, your insurance intermediary will not be able to advise you to invest all of your savings in risk category 7 branch 23 insurance.
- Intermediaries must also take your financial situation into account. They will therefore have to ask you if you have savings, if you own property, etc. These questions may sometimes seem intrusive and make you feel wary, but they are intended to protect you as an investor. A person with a block of 12 apartments and 300,000 euros in a savings account will naturally be able to invest more dynamically than a person without real estate and with only 10,000 euros in an account. You will also be asked about your investment horizon, objective and risk profile.
- Spreading the risk is essential: never put all of your eggs in the same basket. In other words, distribute your savings among different assets, such as property, a traditional savings account, branch 21 insurance (with a guaranteed return), branch 23 insurance, etc. You should also make sure that you keep enough cash to cover any unexpected costs (e.g. total loss of a vehicle or purchase of a new car).
- If you wish to invest in branch 23, it is also in your interest to spread your investment over several funds in order to spread the risk. If a fund performs less well, this would be compensated by the good results of the other funds. A fund which invests exclusively in Japanese equities, for example, may underperform if the Japanese economy is not doing well. Insurers sometimes also offer funds which already consist of several funds. This is already a form of risk distribution in itself.
- You can invest in a branch 23 insurance policy with a single premium, but also through regular payments, such as monthly payments. This is a way to limit the risk of bad timing. No one has a crystal ball to buy shares at the lowest price each time. This is why it is useful to spread your investments over time: even if you sometimes buy shares when their value is high, you can also buy at a much lower price in other months and thus obtain a good average purchase price.
- Many insurers also allow you to purchase additional protection options when investing in a branch 23 product. You might also consider a stop loss (dynamic risk limitation) or a drip feed. Your broker will tell you more.
- In conclusion, here is some very simple advice: never invest in a product which you do not understand.
Find out here about the branch 23 solutions at NN.
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