I often read that you can create an ETF savings plan and then just let it run for 30 years. But is that really possible? I'll do a quick fact check.
Disclaimer in advance: This article is in no way intended to belittle ETFs per se. ETFs are a great investment vehicle. They are easy to understand, have a balancing effect due to the large number of sectors and countries represented and can easily be automated through savings plans. In addition, they are very cheap!
Set it up once and just let it run for 30 years. That doesn't work with an ETF savings plan any more than it does with any other project. Projects always have to be readjusted. Mostly it is because I have changed boundary conditions. Nothing else is the task of politics: constant readjustment, so that the people are kept happy
Look in the rear view mirror ⏮️
The world of ETFs is also subject to constant change, particularly as a result of technical progress. First, let's take a look in the rear-view mirror:
The actual breakthrough of ETFs in Germany took place around the turn of the millennium. Before that, funds could only be bought through fund companies such as Deka – at astronomical fees. ETFs have been approved in Germany since around 2000. It took another four years, until 2004, before specialized ETFs on real estate, gold and emerging markets became available. Over the years, the world of ETFs expanded very quickly and there was a real boom. In the period between 2000 and 2007, there was a hundredfold increase in investments in ETFs.
Die Kosten für ETFs vor der Finanzkrise 2008 im Vergleich zu den heutigen Angeboten waren enorm: Es gab heftige Ausgabeaufschläge im Bereich von drei bis fünf Prozent. Auch heute gibt es noch solche teuren aktiv gemanagten Aktienfonds. Allerdings erzeugen sie bei informierten Investoren heute maximal ein Stirnrunzeln. Die ETF costs have fallen to a tenth in 10 years. ETFs today are as low as 0.3 % fees. Large ETFs often only incur costs of just 0.1 %.
Situation of ETFs today ⏭️
In February 2020, let's take a look at the list of ETFs on the MSCI World Index at justETF. 18 ETFs on the MSCI World are available here. None of these 18 ETFs existed in 2000. The oldest ETF is the ComStage MSCI World UCITS ETF which has been available in Germany since 2008. Many of the ETFs on this list are only a few years old. Especially in 2018 & 2019 numerous ETFs were added.
Further development of the ETF concept in the future
Genau so wie sich die Finanzwelt in den letzten Jahren verändert hat, wird sie das in den nächsten 30 Jahren auch tun. Aufgrund der Digitalisierung vielleicht sogar noch schneller als bisher. Meine Prognose ist, dass sich die Geldströme von ETFs in Robo Advisors verlagern werden. Heute ist es noch mit einem kleinen Premium Aufschlag verbunden um den komfortablen Service der digitalen Anlagehelfer nutzen zu können. Erfahrene Anleger, die hierbei keinerlei Unterstützung benötigen, können durch Direktanlage in ETFs ein paar Euro an Kosten sparen.
But the trend is reversing. now exist Discount Robo Advisor who will reorganize the investment market just as the food discounters did in this sector in Germany between the 1970s and 1990s. The discount model from Quirion*, for the first 10,000 euros, is already (!) on a par with even inexpensive ETFs. In addition, the provider attracts customers by giving them the first savings rate of 50 euros.
For me, this is a clear sign that there is a tough price war in the robo advisor market. In the long term, this price war will lead to a price drop for robo advisors, while at the same time providers with more sophisticated features will compete for customers. In a few years, nobody will want to do without the additional comfort that providers offer. I also assume that other providers will join the Quirion experiment and that the additional costs for the service of the robo, which are still common today, will continue to melt away over the years.
Should I open an ETF savings plan today?
If you start building long-term wealth today, an ETF savings plan is still a good, cheap, and convenient solution. However, expect that over time you will make changes to the ETF selections you made today. ETFs may close. Tax laws are subject to change. So it may be that certain constructions that make sense today will have to be designed differently in the future.
Fees for the ETFs themselves are also forfeited
Since the turn of the year 2020 it has also been possible in Germany ETFs without any purchase fees. This works via rebates that brokers receive from trading partners. The provider Trade Republic* completely eliminates the savings plan fees. Even simple purchases of ETFs and individual shares only cost one euro each. That List of prices and services is only one page long. The provider does not use star texts for pages and is therefore very transparent. Opening a depot, placing orders and setting up savings plans is very easy. What is a great achievement for some, others see as a disadvantage: Trade Republic* can only be operated via Android or iOS devices (smartphones, tablets).
If you want to know more about the provider, I recommend you Trade Republic section in my unsparing depot comparison. There is also a good video about the smartphone broker by Thomas from Finanzfluss.
An easy way to find out which ETFs are available from different brokers is the ETF search by JustETF. If you click on the "Trade Republic" entry under "Eligible Savings Plan ETFs", you can see that the provider has a very good range of ETFs eligible for a savings plan with 310 ETFs.
Set up a 0 Euro ETF savings plan?
If you want to try the broker Trade Republic to set up a 0 Euro ETF savings plan, you can
Alternatively, if you want to try the Smartbroker, you can
If you want to know more about brokers: A lot has happened with the free securities accounts at the turn of the year 2020! I therefore rolled out the depot comparison again and took a close look at the providers. After the latest fee increase, I can only advise against the formerly so revolutionary Flatex….
Conclusion from the long-term ETF savings plan illusion
There is no such thing as a perfect investment product for all times. This includes ETFs and all other financial products in a broader sense. Trade Republic will certainly not remain the only almost free broker. So be aware that ETFs also require a certain amount of readjustment at regular intervals. Of course, the long-term illusion of ETF savings plans is by no means a reason not to start investing at all.
Links marked with * are affiliate links. For each sale through one of these links, I receive a small commission, which does not cost you anything extra.
*Affiliate link: If you get to a provider via one of these links from my website, I may receive a commission. This does not result in any additional costs for you. ❤️ THANK YOU for using these links! ❤️
Disclaimer: This is well researched but non-binding information.
Cover picture: by GraphicMama team From Pixabay
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