Many people shy away from investing in the stock market. You don’t necessarily have to be a stock market professional to trade securities. With our step-by-step guide, everyone can get to ETFs.
So-called ETFs (Exchange Traded Fund) map the values of an entire index, for example the Dax German share index. So if the 40 largest German listed companies develop positively, the ETF does well accordingly.
Investors can achieve a broad diversification of their securities for little money and thus reduce the risk of losses. For long-term asset accumulation, these securities are therefore also attractive for people with little capital. That’s how it works:
Establishment of a cheap depot
No matter what type of securities you want to trade: You can’t do without a custody account. This also applies to ETFs. You can open a deposit with a provider of your choice. The offer is large and ranges from inexpensive neo brokers to online brokers to classic branch banks. In order to find a suitable depot, it is worth doing extensive market research.
“The first impulse to simply open one at the house bank is the easiest way, but it can be quite expensive,” says Jürgen Kurz from the German Association for Protection of Securities. Often there is advice there. But if you can do without it, you should pay attention to aspects such as ongoing custody costs and trading fees, says Kurz. Online and neo brokers often score here.
The range of tradable securities and ETFs varies from provider to provider. According to Kurz, it is worth taking a look at how many ETFs are eligible for savings plans. Especially when the goal is to build wealth with ETF savings plans.
Choose a good index as a basis
Once the custody account has been set up, it is important to find suitable indices that match the investment strategy. According to Kurz, the decisive factors are the desired investment period and the investor’s willingness to take risks. If you want to build up a pension plan, you should by no means neglect sufficient diversification of your portfolio, even if you have a high personal risk affinity.
“Industry indices are ruled out, as are subject and country indices,” says Niels Nauhauser from the Baden-Württemberg consumer center. The popular classic: the MSCI World Index. It includes companies from around two dozen industrialized countries. The MSCI All Country World Index and the FTSE All-World Index also contain companies from emerging markets. ETFs on these indices are very suitable as a basis, according to Nauhauser.
Select ETF
Once you’ve made a decision, it’s time to choose the ETFs. An important criterion is the cost. Because not only the provider of the depot charges fees. ETF providers also incur costs in which investors participate.
In addition to the costs, it is also important to pay attention to the tracking quality, among other things. It indicates how precisely the performance of the underlying index is replicated. One possible difference between the return on the index and the return on the ETF is known as the tracking difference.
According to Kurz, the tracking differences for ETFs are mostly similar. But even small differences can have an impact on returns in the long run. It is therefore worthwhile to superimpose the long-term development curves of the ETF and the replicated index.
In addition, the fund volume of the ETF should ideally be more than 100 million euros, says Kurz. According to Nauhauser, even better than 300 million euros. This brings cost advantages and reduces the risk of closure.
Plan your savings strategy
The custody account is set up, the ETF selected. Now all you have to do is buy shares in the ETF, via app, online or in a branch.
So-called savings plans are particularly common. Those who choose to buy shares of the selected ETF with an agreed amount at regular intervals. Depending on the course, a different number of share certificates then end up in the depot.
Savings plans can start with small amounts, as Stiftung Warentest explains in its “Investing with ETF” guide. The usual minimum rate is 25 or 50 euros per month. ETF savings plans are flexible, however. The rates can be changed or suspended at any time.
Keep your feet still during a stock market crash
Investors who invest in ETFs with a long-term horizon of at least ten years in order to build up wealth should keep their feet still even if the stock market price plummets during the crisis. According to Stiftung Warentest, it has been shown that almost every stock market crash could be made up after a few years. However, if you sell everything quickly in a panic, you will make real losses in case of doubt.