With a fund savings plan, you regularly invest a small amount in an investment fund. But how does it work? How expensive is such a savings plan? And what is the difference to an ETF savings plan? An overview for beginners.
Regularly invest a small amount and have built up a decent fortune after a few years: That sounds tempting. But how is that supposed to work? Quite simply: not with a savings book – but with a fund savings plan.
The advantage: You don’t need a large one-off amount for this type of investment, you just squeeze some money every month, for example 25 or 50 euros, and invest it in an investment fund. These are practically money baskets that the capital of many investors invest in securities, raw materials or real estate.
If the value of the investment increases, you benefit from it. In the long term, you can save a fortune without much effort and without high risk.
What is a fund savings plan anyway?
Instead of investing a larger amount on the stock exchange in one fell swoop, you invest with a fund savings plan over a longer period of time regularly smaller sums of money for which you buy units in selected funds. With some direct banks or online brokers on the Internet, you can already deposit an amount of just EUR 25 per month into a fund savings plan, but the minimum rate is often EUR 50 per month.
You can think of funds as baskets with money from investors. This money is invested in securities such as stocks, commodities such as gold or real estate: there are Equity, real estate or commodity funds.
Unlike a savings plan in shares With classic fund savings, invest in many different investment properties and spread your risk widely. For most funds, a fund manager decides which assets to invest in.
With so-called Index funds or ETFs, that’s not the case. These simulate an index using a computer algorithm, usually a stock index such as the Dax. These index funds are therefore – even in the case of a savings plan – cheaper than other funds.
Another advantage a fund savings plan: you don’t have to worry about the right time to start. Since you do not invest a large amount once, but regularly invest a lot of small sums, it is not even bad if you start with falling prices. In this case, you get more fund units for your money – if the prices rise again later, you will gain potential profits.
Basically: Only invest money that you will not need for the next 15 or 20 years. Because courses can slip into the negative at short notice. An investment in crude oil, for example, is very volatile. If you have to sell your shares at a low point, you may have made losses.
What are the costs associated with a fund savings plan?
There are different costs for a savings plan. You should pay attention to the following points:
- Deposit costs: Since you first have to open a depotBefore you can create a fund savings plan, you should keep an eye on these fees. With many online providers and direct banks there are no costs for a deposit. With conventional banks and savings banks, a deposit can cost more than 20 euros a year.
- Entry charge: This is the amount a fund company receives for arranging a fund share for you. These costs arise every time a direct bank makes a particular purchase for you. The front-end load can be up to six percent, but online brokers often grant a discount on it. You should pay attention to this, because a high front-end load can reduce your return considerably in the long run (see below). At ETFs Incidentally, there is usually no front-end load, but here there are order fees, which are usually significantly lower than the front-end load.
- Administration fees: These are the costs that a fund company charges for offering a fund. These costs are often summarized in the total expense ratio (“TER” for short). The costs of the funds can vary considerably. ETFs are the cheapest here because there is no need to pay a fund manager to manage the assets.
The following example shows how very different costs can reduce your profit from an investment, in which we assume a savings rate of 50 euros, an annual return of six percent and a term of 15 years:
|Front-end load||TER||Profit||Total amount|
|2.5 percent||0.5 percent||4,476.23||13,476.23|
|4.5 percent||0.5 percent||4,218.31||13,218.31|
|6 percent||0.9 percent||3,597.77||12,597.77|
Should I invest using a fund or ETF savings plan?
It depends on your preferences. As a newcomer to the stock exchange, it is advisable to invest using an ETF savings plan rather than a savings plan with funds. There are several reasons for this:
- Costs: Because ETF’s computers replicate a stock index, they are cheaper than traditional stock or mixed funds. Because no manager has to be paid to monitor the composition of the fund. For ETFs, the total expense ratio (TER), which includes all important costs, is significantly lower than for conventional funds. This also applies to savings plans in ETFs.
- Yields: With broad diversification, ETFs achieve long-term returns that are at least as high as classic actively managed equity funds. This is because even experts rarely succeed in making exact forecasts of future market developments – in order to generate better returns than the entire market that an ETF covers.
- Transparency: Another advantage of ETF savings plans is the greater transparency of ETFs compared to conventional mixed or equity funds. As an ETF tracks a specific stock index, you as an investor always know which company shares the fund contains. Actively managed funds are often less transparent. As an investor, you often only find out with a delay or on a specific key date which shares the fund is made up of.
How do I compare fund savings plans?
You can find various comparison portals on the Internet where you can compare the terms of the savings plans. Several factors are decisive for the comparison:
- Costs: Not only the depot costs, but also administration fees and front-end load are important (see above). When comparing, you should definitely pay attention to this – and possible discounts that are granted.
- Selection: The different direct banks have different offerings. Not every direct bank has every possible fund type.
- Yield: The returns, called returns, also vary with the type of fund on which a savings plan is to be concluded. So it is included Equity funds usually around six percent, with bond funds, i.e. funds that invest in bonds, around three percent.
How much money can I get with a fund savings plan?
There is no general answer to how much money you have at the end of a fund savings plan. So it depends on the costs, the Fund type or the running time how much wealth you have built up.
You can check on the Internet what your fortune will be approximately after a certain time. Use a “fund savings plan calculator” or simply an “interest calculator”. But be careful: In reality, the annual return you enter there does not remain the same, but fluctuates. You should take that into account.
Can I also take out a fund savings plan for my child?
Yes, you can – and it’s worth it. The basic principle here is: the earlier you start saving, the better. The reason for this is the Compound Interest Effect: The earlier you invest money, the greater your potential profits over the years.
Many direct banks therefore offer extra custody accounts Fund savings plans for children at. These are often even cheaper than conventional depots. You can usually start investing here at just ten euros a month.
You can open this depot from the birth of your child. What is special: Although the depot officially belongs to your child, you are responsible for it. It is also often not possible to invest in highly speculative businesses such as hedge funds that are not suitable for you as a private investor anyway. You can also do that in one Junior depot do not deduct any money invested for their own purposes.
The child can have the money paid out as soon as they reach the age of majority – or transfer the shares to a conventional custody account. However, it is usually not possible to transfer a fund savings plan.
One point you should keep in mind: If your child has too high a fortune to pay the income from a fund savings plan when they reach the age of majority, it may not be possible to get a student loan for studying. The allowance for the crediting assets is currently 7,500 euros per year.
What does a VL fund savings plan bring me?
capital accumulation benefits, or VL for short, you get from your employer to build up long-term assets: with savings plans, including a fund savings plan. Whether and how much VL you receive is precisely regulated in the collective agreement or employment contract. However, this is a maximum of 40 euros per month.
Since the money is intended to be invested, you also receive government funding. This also applies to the investment in a fund savings plan for which you can choose.
State funding depends on your income. Thus, when saving funds as a single, you may only have a maximum taxable income of 20,000 euros, as a couple a maximum of 40,000 euros.
The funding amounts to 20 percent of the amount paid – up to a maximum of 80 euros per year. You would reach this amount if you invested 400 euros a year as a single or 800 euros as a couple.
The contract for one VL savings plan complete as an employee and present it to your employer, who then invests the specified amount. There is a vesting period before the VL fund savings plan is either renewed or paid out. This is usually seven years.