If savers want to build up a handsome fortune, they are often faced with a difficult decision: would you rather play the lottery or go public? While 29 million Germans at least now and then fill out a lottery ticket, not even half as many people invest in this country on the stock exchange. The world of the trading floor seems just as risky to many like the casino.
That’s a big misunderstanding. And an expensive one.
For decades, Germans have relied on the federal republican triad of pork, stockings and savings account when it comes to saving. But if prices rise by more than eight percent in just one year, help 0.8 percent interest not on the daily allowance. While prices in supermarkets continue to rise, stock market prices have plummeted in the past year. Go public now? No thanks, many say.
That too is a misunderstanding.
It is by no means guaranteed that those who frantically glance at prices every few months, chase after supposed winning shares or even speculate every minute will be successful on the stock exchange, but rather questionable. Instead, finance professors, fee-based consultants and even consumer advocates recommend with unusual unanimity for the normal investor: Hang your money on the course of a global stock market barometer, follow hundreds of stocks at once. And then: do nothing.
ETF is the name of the three letters of those financial securities, with which millions of investors in Germany follow one to one one of the numerous stock market indices. If the index rises by two percent, the ETF should rise accordingly; if the index falls, so does the ETF. But what began as an impressively simple idea has now become quite complicated. The number of ETFs on offer alone can put off a beginner.
That’s why the SZ now explains in a new newsletter what investors need to know – right from the start. Which index fits best, where the depot is cheapest – and why 25 euros are enough to get started. ETF-Coach is the name of the newsletter that reaches everyone once they have registered. The promise of the ETF coach? Anyone who ticks off the checklist at the end of the newsletter mail every week will be familiar with ETFs after three months.
But why should you invest in the stock market at all? The answer to that is as old as it is constant: Because on average it’s worth it. The Baden-Württemberg consumer advice center calculated: anyone who invested 10,000 euros at any time in the past half-century and followed the world stock exchanges for more than 30 years ended up with the average with around 90,000 euros there. Three London financial historians even calculated back to the year 1900: on average, investors could have achieved a return of 8.4 percent per year with the world stock exchanges. Even if the researchers factor out the effect of rising prices, investors in developed market stocks still have an average return of around five percent per year.
“Many people overestimate the short-term ups and downs on the stock markets,” says finance professor Hartmut Walz from the Ludwigshafen University of Applied Sciences, “and underestimate the long-term opportunities.” In the worst case, a loss of 57 percent was possible, but after around 14 years even that was made up for.
Instead of the domestic leading stock exchange index Dax with its only 40 titles, many ETF savers rely on a much more unpronounceable letter abbreviation with the title MSCI World. Behind this is a stock market index with more than 1,500 stocks from 23 industrialized countries, from A for the tech group Apple to Z for the fashion retailer Zalando. “The MSCI World relieves private investors of the selection of individual stocks, sectors or countries,” says Markus Thomas from the ETF analysis company Xenix. “The index rules ensure that investors follow the top 1500 listed companies indirectly at all times.”
The idea behind it? If investors spread their money over many stocks, they reduce the risk. As obvious as the principle sounds, the purchase can be complicated. If investors type the world index MSCI World into their bank’s online search, they will sometimes find more than 20 ETFs from different investment houses. “The index is identical for all products, but the costs and structures of the products differ significantly in detail,” says ETF analyst Thomas. “And with it the investment results.”
In the meantime, in Germany there are a total of around 1800 ETFs on the market, but not every one of these stock exchange funds is suitable as a main investment for private investors. There are indices only for Chinese technology stocks, especially for Canadian gold mining stocks or American hemp stocks. Just because the financial industry packs special investments into an index doesn’t mean anything. “Many theme ETFs are often only based on a comparatively small number of stocks, usually only 50 to 150 stocks,” says ETF expert Markus Thomas. “These products should therefore always only be an addition to the portfolio.”
This is exactly where the new SZ newsletter comes in: starting today, interested readers can register with their e-mail address on any day, and they will then receive an episode in their digital inbox week after week. In twelve steps, the newsletter explains with experts how savers find the right index, order ETFs on the stock exchange – and stay cool in a crash.
Incidentally, the SZ newsletter and the stock exchange have one thing in common: they can decide for themselves whether to start the newsletter today or in three months. Incidentally, at least on the stock exchange, the question of the right time is surprisingly simple: those who invest for a period of 15 years or more, say financial experts, should start immediately.
You can register at the following address and receive the first issue of the ETF Coach on the same day: sz.de/etf-coach