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Fund Saving: A long-term attractive investment

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Investors invest in long-term savings: over a longer period, certain amount of money is regularly paid into shares of a fund. In this way fund units are acquired, which can manage savers in a deposit with different banks. Fund savings are often said to yield higher returns than other investments. But they are also subject to the risk of price fluctuations, which can result in losses. Anyone who thinks about an investment should know the following:

Long-term investment with fund savings plan – how it works

Long-term investment with fund savings plan - how it works

If you want to save funds, you will first need a securities account. You then have the option of determining the amount of the installments yourself. Besides, you choose the regularity of saving rates. Most banks give you the choice to save monthly, quarterly, semi-annually or annually. Moreover, select from a selection of mutual funds that best fit your investment strategy. The choices include:

  • equity funds
  • Investment funds
  • Balanced funds
  • Index funds
  • Real estate funds
  • bond funds

After an agreed deposit phase, the portfolio is at your disposal. You decide for yourself whether you can pay it off in one amount or in regular installments.

Funds as investments: only profit or even risk?

Funds as investments: only profit or even risk?

The advantages of fund savings plans

  • You decide for yourself which amount you would like to deposit regularly.
  • Included securities can be sold at any time.
  • You decide on your own which funds you want to invest in.
  • With funds, you have the opportunity to invest in different companies and thus spread your risk. Even when a company loses its share price, you still have the possibility of increasing the price of other companies and offsetting the loss.
  • Depending on how much the prices are, you buy more or less shares for a fixed amount. This will give you the cost-averaging effect: this effect comes when you invest a consistent amount. The fluctuations in value make your shares cheaper on average than if you invest different amounts of money on a regular basis: if the prices are high, fewer shares are automatically purchased. If they are low, you can buy more shares for the same price.
  • Savings plans help you to save regularly. Initially, you set an amount that you deposit and do not spend on other purposes.
  • You decide in which form you would like to pay off the amount saved at the end.

The disadvantages and risk of loss of fund savings plans

If you invest in funds, you will incur additional costs in addition to the amount you paid:

  • This includes, on the one hand, the so-called sales charge. This varies depending on the fund. However, you should be aware of this, as some banks offer 100% discount on the premium.
  • On the other hand, deposit and management fees are payable.

Funds are subject to fluctuations in value. How high your fortune will be after a set of austerity is unpredictable for this reason. How the exchange rates develop in the future is uncertain. Therefore, there are always risks associated with an investment. If you want to forego a fund manager and invest in funds independently, you should be competent accordingly. Only then can you make a meaningful and lucrative fund selection.

Possibilities of fund-saving

After a financial test, Stiftung Warentest recommends investing in index funds (ETFs). ETFs (Exchange Traded Funds), which are exchange-traded funds. As a rule, they replicate a stock index, for example the DAX. In other words, the funds develop in the same way as the market index they portray. If this rises, investors achieve a price gain. If this falls, the investment is accompanied by a loss.

Again, you invest parts of your assets in the capital market. You must also remember that an investment can always be associated with risks of loss. However, if the price is positive, you have the opportunity to benefit from the stock performance, bonds or the like. Before investing, you should be fully aware of the opportunities and risks of ETFs.


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