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ETF savings plan

Advantages

Automated
Flexible
Low costs
Cost-average effect
Outsmarting the psyche

Disadvantages

Perseverance
Lack of research
Wrong ETF choice
One-time investment makes more sense

Costs of an ETF savings plan

As is well known, passive ETFs are far superior to most active funds in terms of cost. This is due to their simple and transparent structure. However, there are costs that you should be aware of before setting up a savings plan.

  • Custody fees
  • Order fees
  • Spread
  • ETF fees

Some banks and online brokers charge custody fees for a ETF savings plan account. This can be a fixed annual amount or depend on your deposit volume.

Most banks charge fees for buying and selling an ETF. This also applies to savings plans that are not part of a promotion.

The bid-ask spread of an ETF is the difference between the price at which investors can buy the ETF on the exchange and the (lower) price at which it could be sold on the exchange.

The ETF itself receives a management fee (TER), which is most often represented by the annual amount. For example, if you hold 100 euros over one year in an ETF that has a TER of 0.30%, the ETF provider receives 30 cents.

Possible yield

The most interesting question for many is, of course, the possible yield and profit. Here we look at a few examples that clarify how important it is to start thinking about investing and saving money early. Someone who is already able to save a small amount with a savings plan after completing their education often has an easier time than someone who only starts thinking about the topic shortly before retirement.

Here is an example with the following specifications:

100 euros savings plan instalment per month

5% yield per year

For simplicity, we calculate without taxes, costs and inflation.

3 examples

 20 years
 40 years
 60 years

ETF savings plans are in vogue

ETFs are all the rage in Germany and savings plans are the most popular way to acquire them. It is precisely in times of inflation and zero or negative interest rates, that even risk-averse investors begin looking for alternatives and discover the benefits of ETFs and saving in stocks.

Development of funds invested in ETFs

The chart shows the funds invested in ETFs by retail investors at the participating banks in millions of euros.

Number of ETF savings plans

The chart shows the monthly performance of executed ETF via saving plan.

Source: extraetf.com