Definition, return and comparison with ETFs

They are advertised as an all-round carefree package, i.e.How profitable are mixed funds really? We explain how the investment works and what are its advantages and disadvantages.

It doesn’t sound bad at first: buy one product, get multiple asset classes. That is the concept of mixed funds. They are often advertised especially for beginners because you don’t need much time or start-up capital for this type of investment. But do mixed funds really make sense? We clarify the most important questions.

What is a mixed fund?

Mixed funds are mutual funds with which you in Invest stocks and bonds at the same time. The idea behind it: losses in one asset class should be offset by income in another. Whether the share of shares or bonds in a mixed fund is larger depends on the underlying strategy.

For example, if you are willing to take more risk in order to potentially generate higher returns, also known as returns, you would choose a mixed fund that weights stocks more heavily. If you prefer to drive a little safer and are willing to accept a lower return, mixed funds with a larger bond component are in the Portfolio the better choice.

In addition to these classic mixed funds, there are so-called flexible mixed fundsthat may include other asset classes – for example real estate and raw materials. The fund manager can change the weighting between the various asset classes at short notice. For example, if stock prices fall, he could shift your money into real estate. If the gold price goes up, it will direct some of your assets there.

Are mixed funds a sensible investment?

Mixed funds seem to be several advantages to have: The aim is to offset the dangers of riskier investments such as stocks by less risky asset classes such as bonds – and that within a product. The fund’s assets also count as special funds. So even if the fund company went bankrupt, your money would be protected.

Indeed: There are also other types of investments that are considered special funds and that are cheaper to get away with. What about us crucial disadvantage of mixed funds leads: their costs.

According to the Bremen Consumer Agency, the mixed funds actively managed by a fund manager start at 1.5 percent per year and are in some cases significantly above two percent. The various asset classes in particular make it difficult to manage the fund. Added to this are the costs for the purchase of fund units. In the end, all of this diminishes your return.

The best thing about a mixed fund is that you, as an investor, do not have to worry about yourself because the fund manager takes care of everything. You should only opt for mixed funds if this comfort is worth the comparatively lower return.

Important: Mixed funds are only suitable for long-term investment. This means that you should be able to sit out fluctuations and compensate for short-term losses in the long term. If you need funds at short notice, mixed funds are not the ideal choice.

What should you consider when buying?

If you want to invest in a mixed fund despite the costs, you should proceed with caution. “If you read an offer and think that it’s a great fund, don’t buy it right away,” advises Christian Exner from WBS Hünicke Vermögensverwaltung GmbH in Düsseldorf. He recommends that Read the factsheet about the fund in peace and to consider whether the fund actually suits their own investment behavior.

“It is also important to look at how the fund has developed over the past three to five years,” said Exner. What returns have been achieved, how stable was the fund in weak market phases? “The more consistent a fund is in its development over a longer period of time, the better for the investor,” emphasizes Exner. However: The historical development gives at most one hint, however never a guarantee of the future.

Investors should also pay attention to whether over the years always the same fund manager was responsible. “If that’s the case, it’s a good sign,” says Exner. It shows that long-term thinking and a fixed strategy are being pursued with the fund. It is less positive if the fund manager changes constantly – “A change always brings change, possibly a new strategy and ultimately a bit of uncertainty,” explains the financial expert.

Which is better: mixed funds or ETF?

According to the consumer advice center, mixed funds only manage to outperform the performance of a comparable financial product in phases. This is also the conclusion of the most recent study of actively managed funds by the “Finanztest” magazine (issue 06/2020) by Stiftung Warentest. Many products therefore lagged behind their benchmark. This means that they have missed their goal of developing better than the overall market.

The testers were particularly disappointed with flexible mixed funds. In the flexible fund group with a global investment portfolio, only 14 percent of the funds were convincing. It would have been better for investors to have one ETF (“Exchange Traded Fund”) on the international index MSCI World invested.

ETFs are special equity funds, i.e. a collection of many different stocks, in which a computer algorithm replicates a stock index such as the MSCI World or the Dax. The value of ETFs always evolves as the index they track changes. Because you have these index funds too low costs get that Return from ETFs often higher in the end than with classic investment funds.

Gerd Kommer, economist and investment advisor, has a particularly clear opinion of mixed funds. In his book “Sovereign Investing with Index Funds & ETFs” he writes: “Mixed funds are a sad marriage of a stock fund and a bond fund marketed as a love marriage. Investors are almost always better served when buying equity funds and bond funds individually.

Kommer particularly criticizes the “unclear Wischi-Waschi investment strategy” of flexible mixed funds, which is based on fund managers trying to predict the best time to buy and sell the asset classes – a strategy that science has uncovered as a matter of luck.

And further: “The fee level of mixed funds is particularly unappetizing relative to a 50/50 combination of equity and bond ETFs. This fee ratio is even less favorable than for pure equity funds or bond funds, because the mixed fund investor also relies on the high equity fund fees Bond part pays. ”


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