Anyone who wants to take out an ETF savings plan will inevitably ask themselves the question at what interval should they invest – monthly or weekly. What’s more worth it.
• ETF savings plans possible with different intervals
• Weekly vs. monthly savings rate in focus
• Fees and cost averaging effect
Many banks and neobrokers now offer investors the choice between different savings intervals when setting up an ETF savings plan. While it is most common to set a monthly savings rate, a bi-weekly or weekly savings rate is often also possible. What advantages and disadvantages should you consider and which is ultimately more worthwhile?
The biggest difference between different savings intervals is the frequency of execution. While a larger amount of 200 euros is invested once a month, with a weekly interval, for example, there would be a savings rate of 50 euros. However, with a monthly savings rate there would be 12 executions per year, while with a weekly interval there would be 52 executions.
Frequency of execution
Due to the big difference in the execution of the investment, it is very important to pay attention to the savings plan fees. For example, if the bank provider charges a fee of one euro for each execution, this adds up to 52 euros over the year for a weekly ETF savings plan, while the costs for a monthly interval are only 12 euros. The difference here is quite large.
However, things can look different when it comes to percentage costs, such as a percentage fee per execution, which is 0.2 percent of the savings rate. Here, with a weekly savings rate of 50 euros, the annual fees would only amount to 5.20 euros. The monthly Savings plan However, an amount of 200 euros would only amount to 4.80 euros per year in fees for execution.
If you want to invest weekly, you should pay attention to very low or non-existent fees from the ETF savings plan provider.
Cost averaging effect under the microscope
The cost averaging effect is usually cited as an advantage of a more frequent savings rate. The reason behind this is the fact that volatility on the markets can be better balanced out with weekly savings rates. When prices fluctuate, purchases are sometimes cheaper and sometimes more expensive. In the long run, this pays off because more shares are automatically purchased when prices are low and fewer when prices are high. In theory, this means the average entry price is lower.
However, in practice it has been shown that with a long-term investment horizon, the cost averaging effect can be neglected and has little influence on the return. The timing of purchases on the market is not crucial for long-term profit development, only the market development itself. Although in individual cases, such as in the case of major corrections, it may be worthwhile to buy more often at low prices, over the years the overall return will level out again with other savings rhythms.
According to a calculation by extraETF, only one-off investments have a better return than savings plans. In contrast to one-off investments, ETF savings plans are convincing because they enable investors to save automatically. In addition, not everyone has a large amount of money that could be invested, which makes breaking it down into smaller savings amounts more feasible.
Which savings interval you choose is of course up to you and also depends on your own preferences and your own life situation. The fact is that if you invest consistently and stay invested for the long term, you will get a better return, but the interval hardly plays a role in the long term, as differences balance out over a long investment horizon.
Martina Köhler, editorial team at finanzen.net
