Organized Product: What if the best for your financial health was your homemade financial kitchen?
As in the kitchen, when you do it yourself, it’s not necessarily better than in the restaurant or in frozen dishes, but at least you know what you’re putting in it! It’s less expensive, and sometimes even more efficient! Sometimes, for the better financial health of your savings, you need to know how to mix a few financial components on your own. A recipe for a good indoor organizer box.
Structured products, késako?
Structured funds, structured products, or alternative funds are widely subscribed to by savers (old name, but less marketing, etc.). It is a paradox, because the reward / risk ratio is often low, because the possibility of making gains is always limited. These funds are often investments that are at risk of losing capital. The capital guaranteed (partial or total) displayed in trade brochures generally applies only at the end of the deposit, and in the meantime, nothing is guaranteed. important concern. But she is not the only one. The capital can be guaranteed, but the total fee. Like Euro life insurance contracts, savers do not understand why they are losing money with a guaranteed capital investment. Those damned fees. Comically, these structured funds often rely on stock market indices, about which savers know absolutely nothing. These structured funds were sold mainly by financial advisors to banks and now by life insurance brokers, and have made headlines on many occasions, in Caisse d’Épargne (Doubl’o case) but also in BNP Paribas (Garantie Jet). …by these investments are not uncommon. However, the idea of a structured fund is fun: you have nothing to do but leave your capital invested until the end of the investment. And why not make your own regulated product?
Why build the equivalent of a regulated product yourself?
Lower costs, more performance, unlimited rise, more room to withdraw your money in time, proportional capital guarantee at maturity of your choice… In short, only the best. Doing it yourself remains a child’s play, you still need to know the origin in which you want to create your structured chest. Nothing is better than doing it yourself to understand how it works!
The order of reproduction of the effect of the structured fund
By skillfully distributing its capital between a secured capital pocket (mainly Euro funds) and a risk-prone pocket (UCIs, bonds, structured market funds, etc.), along with the use of one or more automated management options, you can reproduce your run A structured fund, with a capital guarantee of the desired level, say 100%, at the end of the investment. The bonus is that you can get out of your financial package, when financial conditions allow, without any penalty.
- Guarantee all or part of your capital over a certain investment horizon : This calculator to improve the allocation between Euro funds and units of account according to your investment horizon allows you to determine the percentage of investment in the unit of account at risk, taking into account the term of the investment, and we guarantee that the capital is preserved (100% guaranteed) at maturity.
- Protection from financial losses by automatically cutting losing positions on the risky pocket : Modern life insurance contracts provide management options that allow you to cut the focus of financial losses automatically, line by line. Thus, you can indicate to the insurance company that when your investment in a risky asset exceeds 15% of unrealized losses, an arbitration will be conducted. This is very useful stop loss option (or reduce capital losses). This is the unfavorable scenario presented by the structured products distributed in the market. When everything goes wrong, 20 or 30% of your capital loses… Except that, if you choose to never lose anything, it will be possible.
Home Organizer Ingredients
To make a good organizer box, you still need the right components. In the context of life insurance, this particularly means having:
- One or two life insurance contracts without payment fees (ideally a contract for a 100% investment in the fund in euros, and a contract intended for risky investments),
- High performance Euro fund (so not a life insurance contract distributed by banks!),
- Possibility to invest in easily identifiable assets: UCIs related to global indices (for the CAC40 index, it is necessary to choose a fund with listed earnings!), Oil, Gold, or even better, the Garni package, a little of everything A pocket exposed to financial risks,
- Stop loss management option available in the contract (capital gain locking option is an added advantage).
If you have all of this, you can easily build your own structured product.
Choose the flavor of your skeleton box
It is up to you to choose the financial assets on which you wish to base your structured fund. Structured funds in the financial industry are often based on broad indices, such as the Euro Stoxx 600 or others. Nothing obligates you to go in this direction, you can for example create your own organized chest with a real estate flavor. Real estate UCIs, or even more flexible UCIs (like Amiral Gestion’s Sextant Grand Large Fund, a flexible fund that adapts to market conditions available on most life insurance contracts) and that’s it. Be more creative, and make yourself a promising combination.
But you can easily choose oil, NASDAQ, or any other asset. We just mention that gold is by no means a safe haven…
Calculate the amount of ingredients
Depending on the required duration of your investment and the maximum exposure to the risk of financial loss that you accept in the risky investment segment, the distribution between risk free pocket (Euro funds) and risk pocket (account units) is easily calculated based on your investment horizon.
The maximum expected theoretical profit is approximately 11.21% per annum for the capital guaranteed at maturity. Obviously, this will only happen under a positive scenario with expected returns as shown. The maximum loss will be -3.94%, before the expiry of the term, in the event of an unfavorable scenario (activating the stop loss option to automatically execute arbitrage in the case of the most negative scenario). The principal is covered by 100% at the end of the investment, i.e. 10 years (subject to the average minimum Euro Fund return, estimated at 1.70% over the entire investment period). This last point remains a factor of uncertainty, but in this case it looks pessimistic because interest rates are currently rising sharply.
Concrete example of an in-house recipe for a regulated product with a 100% capital guarantee at maturity
List of ingredients used in this homemade structured product recipe.
- Life Insurance Contracts:
- Payment fee: 0%.
- Investment prospects: 10 years.
- Investor risk statement: Balance
- Maximum acceptable losses on pocket at risk: 15th%.
- Maximum Acceptable Losses on the Entire Contract at Maturity: 0% (100% Maturity Guarantee).
- Distribution of funds in euros: 82%, account units 18%..
- Capital to be invested: 15,000 EUR.
- MIF: 12,300 euros.
- CORUM LIFE: 2,700 euros.
Expected Returns (Theoretical, Long-Term):
Maximum: 11.21% per annum,
Minimum: 0% (capital guarantee period only).
These are the ingredients that chefs think of…but should be avoided
No ETFs? Well no, no need. It’s big fashion, but fashion is becoming outdated, and only “real” investments remain. In order to invest in high-yield bond funds, you can do so as straightforward as piling your capital on intermediate funds. ETFs have a fairly low specific fee of 0.20%. This fee adds to or lowers the ETF’s NAV (closing price). From afar, ETFs (or trackers), now qualified in many recent decades, can look like good components of a risky pocket. But it’s a quick investment, like fast food. Poor financial kitchen. In principle, ETFs are actually supposed to reproduce various forms of the underlying asset, for example, the CAC40 index.
Let it mature within your investment horizon…
Once you have determined your investment horizon, and the specific maximum loss in the risk pocket, you can infer the distribution to be made in the Euro Fund. This, of course, requires a cautious approach, because no one can predict the future performance of Euro funds.