Updated: 06.06.2022
With an ETF savings plan, the investor invests a fixed savings amount in an ETF of his choice at fixed intervals (e.g. monthly) . Investors buy more ETF shares when prices are low and fewer when prices are high. This cost average effect reduces the initial fluctuations in the value of the portfolio. In addition, the number of fund shares increases with each interval and, depending on the current price development, the invested capital.
Flexibility is the biggest benefit of an ETF savings plan . In contrast to other forms of investment, an ETF savings plan is based on the respective financial situation of the saver. If only a little and irregularly can be saved during the training, the savings rate and savings interval can be adjusted at any time in further professional life. With many banks and online brokers in Austria you can open an ETF savings plan from a savings amount of 25 euros per month.
An ETF (Exchange Traded Fund) or ETF Indexfonds is an exchange-traded fund that replicates the composition and development of a securities index . The best-known securities index in Austria is the ATX (Austrian Traded Index). It contains the 20 largest publicly traded companies regardless of their industry.
An ETF savings plan has no contractual commitment , it can be terminated or suspended at any time and the installment amount can also be changed flexibly . As a rule, additional one-time payments, such as a special bonus, are also possible.
Savings plans have no fine print . The ETF follows its index and the saver automatically buys their shares for the amount and at the interval they set in advance. The later payout is easily possible via a withdrawal plan. Alternatively, the shares can also be sold on the stock exchange.
The selection of ETFs is huge and savers have the opportunity to invest in numerous securities indices. The indices range from global equities to very specific niche bonds. In order not to lose track, investors should start with a basic investment , such as the MSCI World .
Investing with an ETF savings plan is one of the cheapest ways to make provisions . For example, an investment of EUR 10,000 annually costs only EUR 30 with an average total expense ratio (TER) of 0.3%. In contrast to a robo-advisor , however , the investor must select his ETFs and assess the risk himself.
Most online brokers often offer the execution of many ETF savings plans free of charge or for a low fixed price . The ETF providers then pay the actual costs incurred from their marketing budgets. For this reason, "free actions" are often limited in time and should therefore not be the leading criterion when choosing the index fund to save.
Another strength of ETF savings plans is the low annual management fee . Index funds often only charge up to 0.5% for management, in contrast to the up to 2.5% that classic funds charge their investors. These fees are deducted directly from the fund's performance and are not billed separately to the investor.
In the past , investors were always well rewarded for losing control of the stock market if they sat out interim price slumps. Anyone who has invested in an ETF on the MSCI World for any 15 years in the past few decades has never made a loss - regardless of the time of entry.
In addition, by purchasing an ETF , the investor acquires a share in an investment fund . As a subtype of investment funds, ETFs are special assets that have special legal protection. This means that owners can rely on clear rules and procedures in the event that a fund company, bank or online broker files for bankruptcy.
European ETF assets ( assets under management ) grew to over EUR 1000 billion between 2005 and 2020 . Of course , like all stock market investments , ETF savings plans are also subject to unavoidable price fluctuations . If you need your money in the short term, you should rather invest in overnight money. Due to the current level of interest rates, however, a remarkable increase in value for this form of investment is not really realistic.
An ETF savings plan is basically suitable for every investor who would like to invest small amounts regularly in order to gradually build up assets. An ETF savings plan is particularly useful for savers with little stock market experience, because the automatic execution means they can invest without stress . Parents should think about an ETF savings plan for their children, for example to support them with their driver's license.
With our ETF savings plan calculator , investors can see why an ETF savings plan makes sense, especially for young investors . You benefit particularly strongly from the compound interest effect because the savings plan can run for many years until the money is needed.
Global index funds such as the MSCI World are particularly well suited for an ETF savings plan . These funds contain a variety of companies from different industries and regions. With such a broad investment , savers benefit from global economic developments and at the same time reduce the investment risk .
When choosing ETFs, savers should also consider the amount of fund assets that the desired fund manages. If the investment amount is too small , the effort for the provider is not worth it in the long term and the ETF is discontinued or merged with another . In order to avoid these dangers, investors should ensure that the ETFs manage at least a three-digit million amount in euros .
In addition to deciding which ETFs to save, investors must also decide the type of ETFs they own . In doing so, they determine how the ETF handles its dividends . Investors have a choice of accumulation or distribution and whether replication should be physical or synthetic .