If you want to make provisions for old age or are planning to buy real estate, you can save in securities funds. The return opportunities are higher than with overnight or fixed-term deposits, but fund savers should have a lot of patience.
Fund savings plans enable you to build up assets over a longer period of time. Savers can use this, for example, to supplement their retirement provision after a longer savings phase. The financing of a larger purchase or the purchase of real estate can also be financed through a securities savings plan.
Regularly consistent Amounts
Fund savings plans enable you to participate in the stock market, which is always subject to fluctuations, but in the long term enables significantly higher returns than is possible with interest investments such as overnight money or with classic savings products from banks.
For the saver, fund savings hardly differs from regular savings at the bank, as Roland Aulitzkiy, investment expert at Stiftung Warentest, explains: “You have to imagine fund savings in a similar way to classic interest-rate savings. The only difference is that you don’t invest in interest products, but rather regular, consistent ones amounts in stock funds, i.e. stock funds or exchange-traded index funds, so-called ETFs.
More returns through lower costs
Such an index fund (the abbreviation ETF stands for Exchange Traded Fund) exactly replicates an index such as the DAX or the EuroStoxx 50. Because the index funds are not looked after by a fund management, but rather stubbornly follow the index, the costs are significantly lower than with classic stock funds.
According to expert Aulitzky, index funds are ideal for fund savings: “ETFs have a major cost advantage in that their regular costs are very low, usually only 0.2 to 0.5 percent per year. These costs are the same for classic, actively managed funds In many cases it’s 1.5 to two percent per year. The difference doesn’t seem spectacular, but that’s exactly the effect that makes for big differences in returns in the long term.”
From savings goal to Securities depository
Before starting a savings plan, savers are faced with important questions. A savings goal should first be defined: What would I like to use the saved fund assets for? And how high can the monthly savings rate realistically be that I can afford monthly or quarterly?
In order to be able to actively save for one or more funds, a securities account is required. Most house banks offer such a deposit. However, direct banks such as Comdirect, Consorsbank or ING are usually cheaper. There are generally no fees for the depot here.
Pay attention to the fees for the savings rates
Above all, however, fund savings are usually cheaper even with direct banks, as Stiftung Warentest regularly determines. Because for each savings rate, a smaller or even larger fee is due. In practice, this is either a fixed amount, for example one euro per savings rate. Or the bank charges a percentage fee, around 1.5 percent per savings transaction. Fixed fees are a cost trap, especially with small savings rates, because if you incur costs of two euros each time with a savings rate of 50 euros, you pay the equivalent of four percent in fees.
The savings rate is either transferred to the deposit account via standing order or withdrawn from the current account via direct debit. Fund shares are then purchased with each savings installment. Fragments of funds also end up in the savings account. If a fund share costs around 40 euros, then the fund saver buys 2.5 fund shares at a savings rate of 100 euros. Most providers set a minimum savings rate of 25 or 50 euros.
High flexibility when saving funds
Fund savings plans are completely flexible. With a simple order to the bank or online to the direct bank, the savings rate can be changed, suspended or, if necessary, stopped completely. You can also change fund products at any time.
And the savings interval can also be changed, for example from monthly to quarterly or semi-annually. However, experts like Carmen Bandt from Kidron Vermögensverwaltung recommend a monthly rhythm: “If I save monthly, I have twelve purchase points in a year. This reduces my entry risk and ensures a good average price for entry.”
More returns than deposits in the long term
The so-called “cost-average effect” means that the purchase costs are “averaged” and the stock market fluctuations are somewhat canceled out. Because with the same savings rate, fewer fund shares are bought into the portfolio when prices rise. If things go bad on the stock market and the fund price falls, the fund saver buys more fund shares per savings rate. Due to the fluctuations on the stock market, experts recommend a savings period of at least seven to ten years. The longer the safer – and also more profitable.
In the long term, fund savings can create large amounts of savings capital, even with smaller amounts. Anyone who saves 150 euros a month in a stock fund for around 30 years and earns an annual return of 4.5 percent will have saved around 110,000 euros at the end of the savings phase (see graphic). At the end of this savings phase, the income from the saved fund assets accounts for more than half of the savings amount.
Broad diversify as a basis
Savers are of course free to choose the fund in which they want to save over the longest possible period of time. Many hundreds of classic funds and index funds can be saved. However, experts agree that the basis of a fund savings plan should be “diversified” as broadly as possible, i.e. investing in a large number of international stocks with one fund.
“The first option is the best-known international stock index, that is the MSCI World, where I invest in more than 1,600 stocks from industrialized countries,” says asset manager Bandt, “or I combine the S&P 500 of the largest US stocks the Euro Stoxx 600 of the most important European stocks. This way I also have a broad global investment.
Invest worldwide, pay attention to costs and have perseverance when saving: these are the prerequisites for a fund savings plan with many small amounts to become a large fortune.