Pics and Pacs are two different ways of investing money in financial instruments. The former give the possibility of making an investment in a single solution while the others, however, allow you to invest small sums periodically over time. The possible profits and risks of these products then depend on what you choose to purchase.
What are Pics and Pacs and how do they differ
Pics and Pacs, as explained, are two different ways to invest your savings in financial instruments such as shares or bonds. The former are capital investment plans in a single solution while the latter are capital accumulation plans that allow an investment spread over time.
Both methods can serve the same purpose but are different for various reasons. The first, as explained, concerns the timing of the investment because with the Pic the money comes in all together while with the Pac it comes in little at a time over time.
They also differ in market timing risk as the capital investment plans expose the latter to the market immediately while the others give the possibility of purchasing shares at different times.
Accessibility is also different as while the Pic usually requires a higher investment, the Pac instead requires a smaller sum.
As for the potential return, better results can be achieved with the former if the markets rise immediately after the investment. With the others, however, lower results are obtained in the case of strong rapid market growth. The reason is that some of the money will come into play later.
Finally, as far as costs are concerned, for the Pacs the periodic payments must also be considered which could affect the capital if they are small and repeated.
| Pic | Pac | |
|---|---|---|
| Things | Single contribution investment You pour everything straight away |
Investment in installments Periodic amounts are paid |
| Entry moment | Immediate market entry | Gradual entry over time |
| Market risk | Higher, depends on the timing | Lower due to dilution |
| Capital required | Immediate availability of the entire amount | Reduced and scheduled amounts |
| Suitable for | Those who have liquidity and tolerate volatility | Those who want to invest in a disciplined and gradual way |
| Advantages | Full return if the market rises after entry | Reduces the impact of short-term fluctuations |
| Disadvantages | High risk if the market drops immediately | Lower potential return if the market rises rapidly |
What are the advantages and disadvantages of Pics
Capital investment plans can be very advantageous if the saver already has a considerable sum to invest immediately such as liquidation or an inheritance, just to give an example.
In fact, it can make the most of the effect of compound capitalization, i.e. the interests that accrue generating other interests.
They are also advantageous if:
- there is no need to access capital so the latter can remain invested for a medium-long period;
- we believe that the market is in a favorable moment and we want to accept the risk of a possible downturn.
The main disadvantage is that if you invest at a time when the market is at its highest levels before a correction, you risk losses. Furthermore, the Pic is riskier than the CAP because investing everything you have in a single solution does not offer the possibility of benefiting from temporal diversification.
Advantages and disadvantages of the Pac
For those who build a gradual investment path, capital accumulation plans can be a very interesting product. The main advantages are in fact:
- the possibility of starting to invest even with small sums, perhaps every month;
- the possibility of not having to have large capital immediately;
- the dilution of temporal risk;
- building an investment habit through regular deposits;
- being tied to a pre-established plan as you will not risk selling everything out of fear if the markets go down or buying everything out of euphoria if they go up.
Just as there are advantages, there are also disadvantages such as recurring costs or commissions on deposits which could affect if the sums are very small. For example, you could find yourself paying 10 euros at the beginning and at the end as well as one euro for each monthly instalment.
Furthermore, it should also be considered that if the market grows rapidly after the initial investment, the money not yet invested may not benefit from this opportunity.
What to evaluate before choosing Pic and Pac
Before choosing whether to opt for a Pic or Pac it is important to evaluate your risk profile. If you do not want to take risks, it would be advisable to opt for the Pac while otherwise and also if you are aiming for a potentially higher return then you should choose the Pics.
It is also important to evaluate the time horizon in your choice. If the saver has the possibility of leaving their money invested for many years, even 20, without needing it immediately, the Pic could be the best choice to make the money grow as best as possible over time.
The capital you have is another aspect to consider before opting for a Pic or a Pac. If the sum you have available can be invested immediately, then you should choose the first one. If you only have small savings to allocate each month, the second option may be more feasible.
Market knowledge is a further element to keep in mind. If you are able to choose the right time to invest and are willing to follow the investment, the Pic could be an excellent solution while if you are a beginner and want to risk less, the Pac could be a more protected solution.
Is it better to invest with Pic or Pac?
Choosing whether to invest through Pic or Pac depends on the money you have available, your level of risk and how much you know the financial markets.
If you are starting from scratch, it is better to start with a Pac: investing a little at a time will gradually help you build a piggy bank without stress and without the risk of making mistakes.
If, however, you have experience or use the help of a consultant, then the Pic could guarantee, as mentioned, better results.
The Italians, meanwhile, according to the latest observatory of Assogestioni updated at the end of 2024 prefer the Pic or payment in a single solution (62%). The other type of investment instead involves 21% of investors, a share which however exceeds 50% among those under 40 years of age.
This confirms a greater propensity of young people to plan over time with regular payments, even of lower amounts.
What is the tax on Pic and Pac?
Pics and Pacs have the same tax rules. For those residing in Italy, the tax rate on profits or capital gains (earnings obtained) is 26% while if the same person decides to invest instead in government bonds such as the BTP Valore, the taxation drops to 12.5%.
