Dhe check of the fund giants on the previous pages has shown that if limited risk is important when investing in addition to an attractive return, well-diversified equity or mixed funds are a suitable solution. It is enough for an equity portfolio to select its stocks from around the world in order to perform better over many periods of time than with a purely Germany- or DAX-centric investment. Against this background, broadly diversified funds are ideal for long-term asset accumulation. And it is not surprising that these products are often found in savings plans alongside the cheaper index funds or ETFs.
More and more Germans are choosing this form of investment, in which small sums are regularly invested. Because it’s worth it. The longer you pay into a savings plan, the greater the compound interest effect. For example, anyone who invests EUR 250 per month in a global equity fund and achieves an average return of five percent per year will have more than EUR 200,000 in their portfolio after 30 years. This is more than double the deposited amount of 90,000 euros.
“Investing in shares is a marathon, not a sprint,” says Christine Bortenlanger, executive board member of Deutsches Aktieninstitut. “The longer the investment period, the greater the chance of attractive returns.”
Low barriers to entry for savers
In order to have time as a powerful ally at your side, it is important not to wait forever for the best time to enter the stock market. The sooner you take the first step, the better.
And if you opt for a savings plan, you don’t have to invest a huge sum all at once. 50, 25 or even ten euros are often enough for a savings plan installment (see the table below for the conditions at six popular online brokers). These are affordable sums even for students to start long-term wealth accumulation.
Sometimes even savings plan rates from one euro are offered. Although this means a low entry hurdle for the investor, it makes little sense. But what savings are appropriate? Wealth advisors and financial professionals recommend planning about eight to ten percent of your net income for retirement.
When setting up a savings plan, it is advisable to pay attention to the costs. If you want to save money on actively managed funds, you should see that you can find a broker who discounts the front-end load for these products – often five percent for equity funds – or eliminates them altogether. Otherwise they accrue with every execution of the savings plan.
A clever solution should also be found for the interval between savings plans: if suppliers demand fixed fees for executing a savings plan that are independent of the size of the order, they should – if possible – only be paid four times a year instead of twelve. You choose a different deposit interval: instead of, for example, 250 euros per month, 750 euros every three months (possible savings plan intervals are also given in the table below).
Notice of Conflicts of Interest:The majority owner of the sole shareholder of the publisher Finanzen Verlag GmbH, Mr. Bernd Frtsch, indirectly holds a significant stake in flatexDEGIRO AG, which operates online brokerage under the flatex and DEGIRO brands.
Image sources: KamiPhotos / Shutterstock.com, WK Stock Photo / Shutterstock, Finanzen Verlag
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