Long-term investment: Ensure the growth of your capital

Long-term investment, with an average term of 8 to 10 years or more, is an investment strategy for building a solid financial future. This type of investment is ideal for those wishing to finance major projects, such as the purchase of real estate, children's education or the creation of capital to pass on. This type of investment is based on a long-term vision, seeking to capitalize on accumulated returns to ensure stable, gradual capital growth. Find out more about the fundamentals of long-term investments and how to incorporate them into your investment strategy.

We recommend that you carefully assess the risks before committing yourself to long-term investments, taking into account your personal situation and the economic outlook.

Long-term investing is distinguished by its ability to generate attractive returns while reducing the risks associated with short-term financial market fluctuations.

Advantages of long-term investing

• Stable capital growth: Investing over several years allows you to take advantage of compound interest, accelerating the growth of your savings over the long term.
• Reduced risk : Short-term market volatility has less impact on long-term investments, minimizing potential losses.
• Asset diversification: With a long-term view, you can diversify your portfolio according to the performance of different economic sectors and asset types.
• Tax optimization : Certain long-term investments, such as life insurance policies or PEAs (Share Savings Plans), offer significant tax advantages after a certain holding period.

Long-term investments fall into several categories, offering a variety of investment options to suit every financial project.

Equities

Investing in equities or equity funds over the long term can offer high returns, but it also entails a certain level of risk. Stock market fluctuations can affect short-term performance, but over the long term, equities tend to generate higher returns. Choose shares in solid companies or diversified funds to maximize your chances of success.

Bonds

Bonds are long-term investments generally considered less risky than equities. They generate regular interest income, making them attractive to investors seeking income stability. However, bond yields can be affected by fluctuations in interest rates and credit risks, particularly in the event of a deterioration in the issuer's creditworthiness. This type of investment is therefore sensitive to economic conditions and debt management by the issuer.

Savings plans

Long-term savings investments can also include solutions such as retirement savings plans or life insurance, which enable you to benefit from long-term management of your savings with significant tax advantages. These products are particularly suitable for long-term projects, such as preparing for retirement. However, savings plans may entail a risk of capital loss, particularly if the chosen investment vehicles are exposed to fluctuations in the financial markets.

Mutual funds

FCPs are collective investments that enable you to diversify your portfolio over the long term. By pooling the money of several investors, these funds offer professional management of a variety of financial assets, helping to mitigate risk and optimize returns over the long term. For mutual funds (FCP), the main risk is linked to fluctuations in the financial markets, as their performance depends on the assets in which the fund invests.

Real estate

Real estate is one of the most popular long-term investments. It can provide passive income in the form of rents, while enhancing capital value over the long term. Investing in rental property or SCPIs (Sociétés Civiles de Placement Immobilier) allows you to benefit from attractive returns while enjoying the security of tangible real estate. Real estate investment does entail risks, notably a potential reduction in yield due to vacancy periods or unfavorable property market trends.

Private equity

Private equity is an alternative form of long-term investment in unlisted companies, often in a development or growth phase. Although highly risky, this type of investment can offer substantial returns over a prolonged period. Investing in private equity companies allows you to participate in their long-term growth, with the possibility of seeing a significant increase in the value of your investment as these companies develop or prepare for an initial public offering (IPO). Eurazeo funds, a management company specializing in this field, offer access to private equity investment opportunities from as little as €10,000.

It's essential to define a long-term investment strategy that matches your financial goals and risk tolerance. Here are a few key points to help you develop this strategy and select the best savings investments.

Define your financial objectives

Before investing, it's crucial to clearly define your financial objectives: saving for retirement, financing your children's education, or simply growing your capital. These objectives will determine the type of investments to favor and the appropriate investment horizon.

Identify your investor profile

Your investor profile plays a central role in the selection of long-term investments. Investors willing to take risks to achieve higher returns may invest in more volatile assets, such as equities. For a more secure approach, bonds or real estate investments may be considered.

Diversifying your portfolio

One of the key principles of long-term investing is diversification. A diversified portfolio minimizes risk by spreading investments across different asset types, sectors and geographical areas. This diversification enables you to reduce the impact of downturns in certain markets, while optimizing long-term returns.

Once you've defined your long-term investment strategy, it's important to adopt practices that maximize your investment returns. Here are some tips for optimizing your investments.

Review your portfolio regularly

Although long-term investing means not making sudden moves in your investments, it's a good idea to review your portfolio regularly to ensure that your investments are still aligned with your objectives.

Benefit from dividends

Some stocks and investment funds pay regular dividends. By reinvesting these dividends, you can benefit from compound interest, which can significantly boost your investment's long-term performance.

Focus on low fees

Management fees can have a significant impact on long-term net returns. It is therefore important to compare different investments and choose those with reasonable management fees. This will enable you to keep more of your earnings.

Although long-term investments are often seen as a strategy for financial security, they are not without risk. Here are a few factors to consider before committing to investments over an extended period.

Long-term fluctuation risk

Although long-term investments are expected to stabilize over time, some fluctuations may persist over long periods. Performance may be affected by global economic events, financial crises or changes in economic policy that impact the markets.

Risk of low profitability

Not all long-term investments generate high returns. Some investments may stagnate in value, or grow at a slower rate than expected, which could adversely affect the profitability of your long-term savings.

Concentration risk

A poorly diversified portfolio can lead to increased risk if one sector or asset suffers significant losses. It is therefore essential to diversify your investments over the long term to reduce this risk and protect your savings.

Risk of regulatory change

Tax policies and government regulations can change over time, impacting the profitability of long-term investments. For example, a change in the taxation of capital gains or dividends may affect your returns.

These risks, although present, can be mitigated by rigorous professional management, diversification and strategic thinking about your investments. Understanding these aspects is crucial to building an effective long-term strategy.

Long-term investments are often attractive because of the tax advantages they offer. In general, capital gains on these investments are taxed more favorably than on short-term investments. Depending on the type of product chosen, tax rules may vary. Some investments, such as life insurance or PEA (Plan d'Épargne en Actions), benefit from tax exemptions after a certain holding period. What's more, the income generated by these investments may be subject to reduced tax rates, or even exempt, under certain conditions. Understanding the tax implications of each type of long-term investment is essential to optimizing your returns. Appropriate tax management can reduce the impact of taxation and improve the profitability of your investments.

Long-term investing offers significant growth potential, but it also entails risks that it's important to understand before committing yourself.

This article was produced by Eurazeo Global Investor for information purposes only. It should not be construed as a solicitation or offer for financial products, nor as legal, tax, financial or any other kind of advice. Readers are invited to contact their own advisors for any analysis relating to the content of this article. The information presented does not claim to be exhaustive. It should not be relied upon as the sole basis for an investment decision. Please refer to the legal documentation of the funds mentioned before making any final investment decision.

Past performance is not necessarily indicative, nor a guarantee of future results. Information on previous investments is provided solely to illustrate the nature of these investments and the related investment strategy and process. There can be no guarantee that the investments made by the funds will yield comparable results, or that the targeted returns will be achieved. Investing in Private Equity/Private Debt funds involves a risk of capital loss and illiquidity.