The Return On Real Estate Is Also A Question Of Valuation. The prices for houses and condominiums have risen rapidly in recent years, especially in metropolitan areas. If you want to buy now, you should pay attention to the evaluation. The greater the disparity between purchase price and rent, the lower the expected return on a property. Almost everyone who is liquid, creditworthy, or both currently seems to be on the hunt for their own four walls or wants to purchase a property as an investment. Low interest rates, good conditions on the labor market, rising wages and moderate economic growth make it possible. It is a natural law of the economy that in such an environment the prices keep on rising. A scarce supply of living space that cannot be expanded quickly meets a rapidly growing demand.

A sensible evaluation as the basis for a successful investment

For investors who want to acquire and rent out a property as an investment property, such average considerations are basically pointless. Because, unlike with liquid investments, they cannot buy the entire market anyway and thus diversify their risk. An apartment building or a condominium are single objects. Their individual characteristics and evaluation alone determine the success of the investment. Where the market as a whole goes is secondary at best. Location factors that favor rising purchase prices and rents are increasingly attractive locations, a strong local economy and a growing population. On the other hand, these attributes are of little use if the residential property is bought too dearly. Then the return is low and the risk of loss is high, if, for example, there are longer rental losses. A sensible valuation is therefore the key factor for all real estate investors.

Absolute purchase prices say nothing

Ranking lists of property prices appear regularly in the media. They show how high the square meter prices are in individual cities and districts. If you want to buy a house, you can get an idea of ​​the financial burden that you will face. The price alone does not say anything about whether a purchase is worthwhile.

The earnings factor or multiplier

If you divide the purchase price by the annual net cold rent, you get a multiple of the annual net cold rent. This key figure is also called a multiplier or profitability factor. The bigger it is, the more expensive the object – and vice versa. As a rule of thumb, buyers should only pay more than 20 times the annual net rent in exceptional cases, for example if a particularly good location justifies a higher valuation.

Also not to forget that; IMPORTANT! As with bonds, if the risk increase then the higher expected gross initial yield on a property expected. Conversely, a higher valuation (and therefore a lower return) is an indication of a lower risk. But if the rating is too high, it becomes a risk itself.

The net rental return

It sets the annual rent in relation to the purchase price, including all one-off and ongoing ancillary costs. The brokerage and notary fees as well as the fees for the entry in the land register are added to the purchase price. The administration and maintenance costs (6 to 12 dollars per square meter per year) are deducted from the net rent. The net rental return should be at least 4 percent for the investment to be worthwhile. If the return factor is below 20, it is often higher.

The return on equity

The return on equity indicates the average annual return on capital employed. All income and expenses in the investment period including loan costs are taken into account. Investors can compare real estate investments with other investments based on the return on equity. It should not be forgotten that the result is always a forecast calculation. Nobody knows whether rents and resale values ​​will develop as expected. The return on equity reacts more strongly to deviations from the expected values, the higher the proportion of debt. On the one hand, the return on equity can be leveraged with a high financing share. On the other hand, the risk also increases considerably.


The income factor and gross initial yield are easy to calculate. The property price is known and buyers can easily determine the local net rent with the help of rent indexes and current rental offers from newspapers and the Internet. However, both key figures only provide an initial indication of the valuation of a property. Whether an apartment or a house is worthwhile for a buyer in an individual case depends on a number of other factors: For example, whether he uses the property himself or rents it, what his credit terms look like and what tax advantages he benefits from.

In The Event Of A Dispute: The Ombudsman As A Middle Ground Between Surrender And Complaint. Ombudsmen mediate in disputes between customers and banks, insurance companies, building societies or other institutions. In some cases, they can make binding decisions for providers. Such arbitration is free of charge for the customer. The ombudsman procedure is therefore an alternative to court proceedings.

The essentials in brief:

  • Ombudsmen mediate in disputes between you and your bank, building society, insurance company or another institution. In some cases, they can make binding decisions for providers.
  • The procedure is free of charge for you. It offers an alternative to the legal process.
  • If you do not agree with the ombudsman’s proposal, you still have legal recourse.

What is the ombudsman procedure?

It happens again and again that a customer and his bank, insurance company, building society or another institute have different opinions on a certain matter.

Points of dispute are, for example, a fee billed, an insurance benefit not granted or the amount of bonus interest in a building society loan agreement. Before consumers think about enforcing their interests through the legal process, it can be worthwhile to call in an ombudsman. This is possible without representation by a lawyer. Ombudsmen, who exist in many different industries, have the role of mediator. You take action based on a complaint submitted by the consumer, obtain a statement from the other party and finally make a mediation proposal. This is only binding for the respective institute in a few cases and is never binding for the consumer.

What are the advantages of an ombudsman procedure?

Engaging an ombudsman has several advantages for consumers:

  • He does not incur any costs because the arbitration board is financed by the institutes. This does not include your own costs, such as postage for submitting documents. If the arbitrator’s verdict is unsatisfactory, the customer continues to have legal recourse. The same applies if the institute rejects the ombudsman’s arbitration ruling.
  • Using the ombudsman usually leads to a so-called suspension of the statute of limitations. This means that the claim cannot expire for the duration of the arbitration procedure. A (more expensive) court proceeding has such an effect of preventing the statute of limitations. If you initiate the procedure to suspend the statute of limitations, you must first make sure that the suspension can actually occur! Also clarify the date until which the statute of limitations is suspended in your specific case.

When is an ombudsman procedure not possible?

The ombudsman does not act in all cases. So the arbitration process cannot be used if, for example

  • The customer and the institute have agreed
  • the legal process has been taken – i.e. a lawsuit has been filed in court
  • another arbitration board has already been engaged,
  • certain amounts in dispute are exceeded,
  • the customer only wants legal advice / legal information or
  • a possible claim has already expired and the institute invokes the statute of limitations.

On what basis does the ombudsman make decisions?

The arbitration boards only decide on the basis of the documents submitted and the descriptions of the facts by those involved. Witnesses, such as employees of the institute, are not heard.

Low Interest: How Should You Invest Your Money Today? For several years now, a downward trend has been noticeable in overnight money, fixed-term deposits and the like. Take overnight money, for example: even the top providers on the market currently offer just over 1 percent. At many banks, interest rates tend to be in the range between 0.0 and 0.1 percent.

Although inflation has been low for some years now, the rate of price increases is above the average savings interest, so that the money invested in this way loses value every month. This real loss in value is already a negative interest rate.


In any case, a broad diversification across different product classes and maturities is recommended when investing . Among other things, investors can also use it to protect against inflation.

In addition to overnight money, fixed-term deposits and savings, the purchase of investment funds , real estate funds , precious metals or stocks can also be considered. Basically, investments in real assets (stocks, equity funds, real estate) are suitable as a means of countering inflation. But here, too, the investor cannot blindly access it. How the specific division should look varies greatly from person to person. This depends on the amount of assets, but of course also on the personal willingness to take risks. A fully comprehensive insurance against monetary devaluation does not offer this approach either


With savings account, fixed deposits and call money  is very safe investments, making them a central building block of any investment. The reason for this is the statutory deposit insurance. In the event of a bank failure, 100,000 dollarsgera per bank and customer are protected. However, banks and savings banks offer extremely different interest rates for these types of investments.

It is advisable to check regularly whether the interest rates of your own bank (still) correspond to the top conditions on the market. If not, savers can consider changing credit institutions.  Those who do not want to constantly change their bank can, for example, limit themselves to those banks that have consistently offered good conditions in the past. Ideally, you should save an amount of at least two to three monthly net income in a daily money account. With such an iron reserve, one can react to unforeseen expenses quickly and without borrowing.

IMPORTANT! In general, investors should check the interest currently paid by their bank regularly . If these are well below the top offers, you should think about changing providers.

In the past, good fixed-term deposits were above the inflation rate. However, with such offers, the money is tied up for several months or years. 

It cannot be spent or otherwise invested during this time if interest rates rise during the agreed investment period. Therefore, spread over the terms here too: For example, divide the amount available for a fixed-term deposit by a third and invest it for one, two and three years. In this way, you can respond with at least a partial amount if interest rates rise.

Stocks And Mutual Funds

Depending on your risk appetite and experience, mutual funds can be a suitable component of your investment. This is also a long-term capital investment. In contrast to individual stocks, investment funds offer the advantage that even small amounts can be widely diversified, i.e. buying many different stocks. If the price of a single company falls, price gains in other stocks can compensate for this.

Exchange Traded Funds

Particularly noteworthy in this context are so-called ETFs (Exchange Traded Funds) as a cost-effective alternative to conventional actively managed investment funds. With the latter, the fund manager himself decides which and how many shares to buy for investors, an ETF makes work easier. Above all, this saves costs, as the management fees of ETFs are significantly lower than those of traditional investment funds. However, if a fund incurs low costs, it has to generate significantly fewer profits in order for the investor to achieve a positive return.

Open real estate funds

Open-ended real estate funds can also be a suitable part of the investment. Lately, however, the industry has offered little positive news due to numerous fund closings: During the financial crisis, many investors wanted to get out of real estate funds by returning their shares to the fund company. According to the rules of the time, this was possible almost every day. But a large part of the money was in real estate, which is known to be difficult to turn into money quickly. Since the funds were unable to meet all payout requests, they completely suspended the redemption of units. As a result, no investor got his money for the time being, but had to wait until enough real estate could be sold. This waiting period can be several years. In order to resolve the contradiction between availability at all times and the long-term commitment of money in real estate, the legislature has issued new rules

Gold, silver and platinum

Gold, silver and platinum in the form of bars and coins are often touted as a safe haven against inflation. But caution is advised here too. Precious metals are a risky form of investment. They offer no interest or dividends, profits are only made when the price of the precious metal rises. The best example of this is the gold rate.  Anyone who invests in precious metals should therefore only do so with a small proportion of their total assets. Many precious metals such as gold are quoted in US dollars, so investors are also taking a currency risk.

Investing With Gold. It is not necessarily practical or useful to spend a significant sum at once in actual gold. Gold retirement accounts are an alternative to a one-time deposit. A specific amount is deposited into a retirement account on a monthly basis, such as 100 bucks. You eventually gain possession of the gold that is then held for you by the supplier. In this investment, since you buy real gold, all the risks (sharp price swings, exchange rate risks) that gold carries with it as an investment still remain.

A gold savings plan at first looks like a nice option because of the purchase in instalments, whether you can not or do not want a one-off number. Investors should pay careful attention here, however to expenses and fees. There are also very plentiful, but different deals are worth comparing. Costs can occur in the form of purchase processing fees and storage fees routinely imposed. Furthermore, there is always a spread between the purchasing and sale price: anyone who would immediately sell the gold they purchased would make a loss. You have to wait until the gold price has improved accordingly, if you wish to stop this.

It also clarifies what minimum requirements are given for by the savings plans! The mobility is then restricted accordingly. You will get the gold paid for for certain arrangements – so you pay the travel expenses. Also in this situation, though, you have to ensure that you can keep the gold in another safe spot. It costs more money if you want a safe deposit box or buy your own safe with it. With gold investment schemes, caution against suspicious suppliers and fraudsters is also recommended. You will not see the gold at all, since it is normally centrally stored.

Anyone who wants to invest in commodities such as gold does not necessarily have to buy physical gold (bars, investment coins, etc.). Instead of the gold, he can also buy shares or invest in a corresponding equity fund.

Anyone who does this does not, however, invest in the raw material itself – i.e. in gold – but, for example, in a company that operates gold mines. That is why not only the demand for gold and the gold price play a role in the performance of the shares, but also how profitably the company operates itself. General fluctuations on the stock exchange can also have a negative or positive effect on the value of such stocks.

In short: the price of such stocks or funds will not necessarily follow the course of the gold price. Even when gold prices rise, stock prices can fall.

When buying stocks, only order fees apply. In the case of equity funds, the buyer mainly pays an issue surcharge. In addition, there are various running costs: Investors need a securities account to hold stocks or funds. Some banks charge custody fees for this. In the case of equity funds, additional costs can arise, such as management fees. Transaction costs and custodian bank fees, possibly also a performance fee. The total costs can therefore vary greatly in amount.

Why consumers choose gold as an investment

In times of low interest rates, gold appears to be an attractive investment alternative for some consumers: around three in ten respondents can imagine investing in physical gold. This is shown by a survey commissioned by the market watchdog team at the Hessen consumer center. Younger respondents in particular are interested in gold as an investment.

Main arguments for gold as an investment

Gold is considered absolutely crisis-proof by followers of the yellow precious metal. Your arguments: 

  1. Gold is crisis-proof

It has been valued by mankind for thousands of years. It survived wars, depressions and several currency reforms.

  1. Gold is tangible

    Unlike our paper or book money, it may be something tangible with real value. 
  1. Gold is expensive

    In addition, unlike paper money, gold cannot be increased at will. This limitation and the enormous demand at the same time mean that gold is comparatively expensive.

Main arguments against gold as an investment

  1. Buying

    Gold is relatively expensive. The demand is enormous, not only from private investors, but also from countries like China. There is no certainty, though that rates will keep rising. On the contrary! Past price losses have shown that the price of gold can also fall quickly. 
  • Storing gold is expensive Storing

    the expensive precious metal at home in the linen cupboard or even in a small safe is a high risk and should be carefully considered. Burglars and robbers are a serious threat. Instead, you can deposit the gold as an investor in a safe deposit box at the bank. But it is not available for free.
  • Gold carries a currency risk

    Gold is traded in US dollars. Put simply, this means that when you sell your gold, you first receive dollars and then exchange them for euros. Therefore, currency fluctuations affect the equivalent in euros. This means: If the dollar is devalued, there are disadvantages for the investor when reselling gold, because he gets fewer euros for the dollar.
  • Gold pays neither interest nor dividends

    Gold in itself is not productive: it does not generate profits like the companies in which shareholders invest. And it pays no interest like the banks and states that bond buyers or holders of fixed-term accounts and savings bonds lend their money to. You can only make a profit if the gold price rises and then you sell.
  • The price of gold can fluctuate widely

    As an investor, you have to hope that the demand for gold will increase in the future. If it falls, the course will fall too. In the past, strong price fluctuations were not the exception, but the rule: Between 1987 and 1999, the gold price halved.

Equity And Own Work. Equity and personal contributions: You should calculate carefully here

Without a minimum amount of equity, solid mortgage lending is not possible. You should therefore now determine the amount of credit you have already saved in your financing.

Last but not least, the question of whether the credit is available immediately is also important when preparing the equity. If not, you have to finance it until the due date – and the additional expenses incurred in the form of additional loan interest should be taken into account in the financing planning.

Here is an overview of the financial resources that can be used as equity in real estate financing:

  • Call money and time deposits are available at short notice and can be used immediately as equity.
  • You can basically sell investment fund shares and shares on the stock exchange at short notice and thus use them as your own funds for building without interim financing. However, there is a risk of having to realize possible losses in the event of a stock market low, depending on the price development. In order to minimize the risk of a possible price loss, you should exchange stocks or equity funds for non-volatile overnight or time deposits as soon as you have decided to buy real estate.
  • Savings bonds or long-term fixed-term deposits can usually be financed through to maturity without any problems. You should definitely include the difference between credit and loan interest in your cost calculation.
  • In the case of building society savings, it depends on whether the contract is already ready for allocation and whether you want to use the building society loan to finance it, provided it is a low tariff. If necessary, you should also choose bridging finance until the contract is awarded – while this is more costly in the short run, you will then profit from the relatively low interest rates on construction loans to society in the long term.

IMPORTANT: Do not invest all your free funds in the property up to the last dollar, but keep a sufficient cash reserve available for unplanned expenses. Otherwise, you would have to invest in expensive installment loans, and that could put a heavy strain on the liquidity calculation.
Often, personal contributions to construction – popularly referred to as “muscle mortgage” – are added to equity. But you should be careful here: not all work can be done in the evening or on Saturdays, and at some point the vacation quota is exhausted. If, over time, the motivation among friends and relatives decreases, this can be the beginning of serious scheduling and money problems.
In order to eliminate such risks as far as possible from the outset, you should also plan enough reserves for your own contributions in order to be able to cope with unforeseen expenses and difficulties.

IMPORTANT! In the case of so-called “outfitting houses”, it is advisable to critically compare the price reduction due to personal contribution with the additional costs due to purchasing the material yourself. If your own work is not adequately remunerated after deducting the additional material costs, it can make more sense to forego your own work and generate the additional equity through overtime or a part-time job.

In general, you can assume that even energetic, skilled and committed builders can only save more than 15,000 dollars with their own work in the rarest of cases. That should also be the upper limit for you if you want to avoid additional financial burdens at the end of the construction period.

What Are The Advantages Of Etfs? Transparency, security, risk diversification – ETFs offer several advantages over other forms of investment. We present the most important.

Whether you compare them with actively managed mutual funds or with certificates – investing money with the help of exchange-traded funds (ETFs) offers private investors some remarkable advantages.

1. Low cost

The most significant advantage of ETFs over actively managed mutual funds is also the most important: ETFs cost less. The management fees for actively managed equity funds are usually 1.5 to 2 per cent of the fund’s assets. The prices for ETFs, on the other hand, are generally between 0 and 0.8 per cent of the fund’s assets.

In addition: for many actively managed funds, banks require investors to pay an initial charge. This is due when the fund is purchased and can amount to five per cent of the investment amount or more. With only a couple of exceptions, there are no such sales charges for ETFs. This is also different from conventional, non-exchange-traded index funds: When buying ETFs, only the usual transaction costs on the stock exchange are due. With a cheap custodian bank, these are often less than EUR 10 per order.

Another advantage: actively managed funds are always buying and selling securities. And like other investors, the fund companies have to pay stock exchange fees. This also reduces the returns for investors – in addition to the fees. ETFs, on the other hand, only passively track an index and therefore trade in securities much less often.

The low costs have a direct effect on the wallet of investors: Only a few actively managed investment funds develop better in the long term than the cheap ETFs. For example, the financial economist Mark Carhart examined 1,892 actively managed investment funds for a long-term study. His result: Over the 35 years from 1961 to 1995, 94 per cent of all actively managed funds performed worse than their benchmark index – because they were unable to offset their high-cost burden with an excellent selection of stocks.

In other words: The fact that actively managed funds can generate above-average returns for investors is only an apparent advantage. Most funds cannot keep this promise.

2. Liquidity

ETFs sell faster than traditional mutual funds – so they can be turned into cash more efficiently. The reason behind that is, ETFs are traded on the stock exchange – constantly. Conventional investment funds, on the other hand, are usually returned to the fund company when they are sold. It can often take a couple of days for the sales proceeds to be credited to your account.

3. Security

Security with ETFs – that doesn’t mean that there are no price fluctuations. But it says: ETFs enjoy the legal status of a special fund just like conventional investment funds. That means: Your shares are kept separate from the assets of the fund company. And if a fund company should ever go bankrupt, your ETF shares are not affected. This is different, for example, with index certificates or so-called ETCs (Exchange Traded Commodities), which track the performance of commodities. These are legally bonds issued by the issuer (issuer) – and therefore not protected in the event of bankruptcy.

4. Transparency

As a rule, investors do not know which securities are contained in an investment fund on a particular day – the fund companies usually only publish this information on a specific date and with some delay. The performance and the underlying securities of a particular stock market index, on the other hand, can be easily understood – by looking at the daily newspaper or an Internet portal.

5. Risk diversification

Actively managed funds are also legally obliged to reduce the investment risk by investing in a relatively large number of different securities. With ETFs, however, the risk diversification is even greater. An ETF on the currency 50 shows the development of all 50 stocks contained, an ETF on the American S&P 500 index even indicates the growth of 500 stocks. And whoever buys an MSCI World ETF even gets the performance of more than 1,500 stocks from all over the world.

Compared to individual stocks, ETFs do even better in terms of risk diversification. If you want to spread your risk appropriately by buying individual stocks, you need at least 50 different values ​​from different regions and industries. Without a lot of money (and knowledge) this is hardly feasible. ETFs offer a simple and inexpensive alternative.

6. Even for small fortunes

Due to the wide spread of risk, ETFs are ideal for smaller assets. If you want, you can build a complete portfolio from just three ETFs – and thus cover the bond asset class as well as the stock markets around the world.

The answer to this question will determine which system makes the most sense.

What Is My Investment Goal? Many consumers want to build up reserves in order not to have to pay bills, for example for a car repair, with an expensive overdraft. A call money account is ideal for such a reserve. When it comes to resources that can be invested for a few months or years (for example, repairs to your own house, saving for the children’s studies), fixed-term deposits and savings bonds come into question.

Comparison Of Interest Rates Can Be Worthwhile

Even if many online interest rate comparisons are only brokerage platforms that usually do not cover the entire market, they are still helpful in finding attractive offers. Many good offers are limited in time (new customer offers) or they are limited in amount. Some banks with extraordinarily high-interest rates are located abroad and are therefore not subject to domestic deposit insurance. If safety is the top priority, these offers are discouraged.

If you save for your own home, you usually don’t want your assets to be exposed to more significant risks. Then only interest investments with domestic deposit insurance are a good option. Investments with more risk, such as equity funds, promise a higher return, and that may seem tempting. But what if the risk occurs? Is it then still possible to buy real estate?

A new home loan and savings contract can be worthwhile if interest rates rise sharply. Anyone considering this should also ask themselves whether they can still bear the rest of the financing even if interest rates rise because a home loan and savings contract is usually only a small part of a financing package due to its high repayment rate and the minimum savings.

Saving for old age, high-yield forms of investment are particularly interesting because they enable the highest pensions in the long term. However, you have to dose the mix of opportunities and risks individually.

When Too Much Risk Becomes Critical

The key is to avoid bad risks and instead take good risks.

Investors do not always have good experiences with risk. Anyone who has invested money in shares in Telekom or the Neuer Markt, for example, will usually not be able to gain anything positive from the stock exchanges. But the risk is not all bad, because threats are always associated with opportunities. The key is to avoid bad risks and instead take good risks. Reasonable risks, on the other hand, are those that only affect the development of the entire stock market, measured against a stock index.

Before you invest money in the stock market, there is a central question that only you can answer on your own: Do you want to take more risk for more opportunities and if so, where is your pain threshold? How much (or percentage of the investment amount) could you forego in the worst case? Many investors find it challenging to find an answer to this. Take enough time for it. Don’t just look at the risks, weigh the opportunities too. Your gut feeling is important, because if you don’t feel well as soon as the stock market crashes again – and it does all the time – you should stay away from it or limit the share of stocks.

Real Estate Funds. Shares in closed real estate funds are sold like hotcakes. Spectacular bankruptcies and the conviction of individual initiators for capital investment fraud show, however, that you as an investor can burn your fingers violently with these products, which are usually offered as risk-free (“real estate is always safe”).

What is a closed real estate fund?

Real estate funds are offered in two different forms: as “open” and “closed” real estate funds. The difference is significant. In the case of closed funds, financiers/investors are advertised for a specific investment object. When the required amount has been collected, the fund will be closed, and the implementation of the project can begin. In the case of a closed real estate fund, this is, for example, the acquisition or construction of a property and the subsequent rental. The later sale of the property can also be planned. Investors take a considerable risk with such an investment because success depends on the development of a particular real estate project. Open real estate funds, on the other hand, function like equity funds. Many investors throw small amounts together. The fund management uses this money to buy various properties. Profits are made through rental income and property sales. Because open-ended real estate funds acquire many different properties, they can spread the risk better.

However, the risky closed-end funds are usually offered by financial advisors at your doorstep. With the signing of the contract, the investor becomes a co-owner of the financed property, which can be an office building, a business park, but also a senior citizens’ residence. If the property cannot be rented out as planned, the entire investment concept wobbles. The investor may lose all of the money invested.

What are the risks of the investment?

The economic success of closed-end funds depends on how successfully the investment property can be rented out should not rely on protection in any circumstances, of the “rental guarantees”, which are often touted as a sales argument. The investors are promised that nothing can happen to them or their fund, as another company guarantees individual rental income. Behind this are regularly financially weak companies that can only guarantee an individual rental income for a few years. If it is not suitable to attain the calculated rent on the market over the long term, the “guarantor” is quickly broke. It can also be the case that the “guarantor” builds loopholes into the guarantee granted by him and does not have to pay in the end.

Long-term rental agreements concluded with well-known companies, for example, from the food industry, offer a little more security in the planning phase. But, it is difficult to consider whether these contracts will be extended again after the lease expires. It becomes very risky if the fund relies entirely on the free rental market – and miscalculates in the process. An oversupply of offices and apartments leads to a drop in prices, a fact that has already resulted in severe losses for many closed-end real estate funds and thus for investors.

If the fund property is vacant for a longer period of time, in the worst-case scenario, the fund could go bankrupt, and the invested capital could be lost. If the participation is then financed with outside capital (i.e. you as the investor have borrowed the money invested), the capital investment can prove to be a threat to your existence, because your loan instalments continue to run there is also a currency risk for fund properties abroad, for example in the USA. Due to currency fluctuations, the return can go up as well as down.

Withdrawal from the contract is often only possible after 15 or 20 years. But even then, it is not the capital employed, but only the current value of the participation that is replaced. This is usually significantly lower than the capital employed because, especially in the initial phase of long-term funds, losses are predominantly produced. The investor cannot check the correctness of the amount himself without outside help. Calling in a specialist costs money again. Even if the sellers of such funds often claim otherwise: There is no significant sales market (“secondary market”) for the units. And finding a buyer yourself is usually hopeless. If the invested money is to be “available” quickly, a closed real estate fund is the completely wrong investment.

Are there any tax benefits?

Only those who pay a lot of taxes can save taxes. For the average earner, this sales argument is almost never true. If the investment advisor promises you a tax advantage without even knowing your specific tax situation, this is a clear warning signal. You also keep in mind that tax laws and personal tax bases are subject to change. Without the “green light” from your own tax advisor, you should therefore not take the tax advantages promised with closed real estate funds at face value.

Which costs arise?

When buying shares in closed real estate funds, an “agio” – often 5 percent and more – is usually added to the investment amount. The sales department collects that. The rest of the money is by no means fully invested. Hidden in the prospectus there are indications that trustees, tax advisors, initiators and credit brokers are drawing further large amounts, sometimes even continuously, from the fund investment. This cashing in jeopardizes the promise of returns. The more the initiators reach into the pot of investor money, the more difficult it becomes to close these gaps in the market through profits. Because fund operators are by no means economic magicians, even if they like to give themselves this image. The providers are obliged to prepare a sales prospectus. This contains the economic and legal details of the relevant fund. It must also show the costs. The most important data are also summarized in brief in the key investor information. They are to be made available to investors before making a purchase decision.

Quality has its price: the lower, the better

Investment Funds. Costs influence the return on any investment. In the case of equity funds, additional annual costs of 1.5 per cent in the case of a one-time investment can halve the capital growth in the long term. Many studies clearly show the connection: Cheaper funds are more attractive in the long term than more expensive ones. We, therefore, advise against funds of funds, because here you get paid twice.

Consultants who advise you on a commission basis also earn money from these annual costs, because they receive a portfolio commission. Products that neither consultants nor the fund industry earns much from are reluctant to sell.

We recommend so-called exchange-traded index funds. These funds do not need expensive fund management because they replicate a stock index such as the Dax. That saves costs and increases your return.

The Past Is Over, The Future Uncertain

Anyone looking for the best funds of the past will always find them. But don’t expect that this quest can help you make decisions about the future.

The best funds of the past few years will at some point be average, because of course, the managers of these funds cannot predict the future either. On top of that, if you move up to the top of fund rankings, you usually run an above-average investment risk. At some point, this will take its toll on, and it is not uncommon for today’s top funds to mutate into tomorrow’s flop funds.

Back And Forth Makes Pockets Empty

Because the future is so uncertain, you shouldn’t try to get into funds at the lowest price and sell at the highest price. This causes unnecessary order fees. Plus, you probably won’t have a lucky hand with this. In any case, many studies have already shown that private investments fare worse on average, the more they trade. Comforting: the professionals are not doing any better.

Discipline Pays Off

You can only expect the long-term returns from equity funds, which many raves about, around 7 percent per year, if you implement your investment strategy with discipline, even when the capital markets get restless.

Two common mistakes to avoid: Don’t buy equity funds because they are doing pretty well right now. And don’t sell equity funds just because they’re doing poorly. The stock markets are always exposed to capricious price capers. Only those who are not impressed by this have a chance to reap long-term returns without significant losses.

Gold ETCs (Exchange Traded Commodities)

Investing With Gold. ETCs are similar to certificates, but they also have similarities with ETFs, the exchange-traded index funds.

ETCs (Exchange Traded Commodities, translated: exchange-traded commodities) are debt securities and are intended to track the performance of commodities as precisely as possible. Legally, they are bonds. ETCs are thus similar to certificates. They share other characteristics with ETFs, the exchange-traded index funds: ETCs are fundamentally indefinite and can be traded on the exchange as you wish.

ETCs are secured in various ways. However, this does not necessarily protect you as an investor from the issuer risk. The well-known gold ETC Xetra-Gold, for example, is 95 per cent secured with physically deposited gold and a further 5 per cent with gold delivery claims. There is still no one hundred per cent security in the event of the issuer’s insolvency. The shares would then be treated in the same way as claims of other possible creditors. So you would be one believer among others with no guarantee that you will see the money you reinvested.

Investing money with the help of ETCs is complicated because not all products reflect the actual gold price. Instead, many ETCs invest in gold futures, which are commodity futures. So they will ultimately depend on contracts for the supply of gold in the future. In good time before the delivery date, however, they sell the contracts and buy a new future. In this way, the companies avoid the problem of actually having to store gold.

However, the prices for futures contracts may differ from the actual gold price. Also, the cost of gold can go up while the price of a gold futures contract goes down.

Creating using ETCs can, therefore be very confusing. To make matters worse, the term ETC is not used consistently. Thus, the following also applies here: If you have not understood how the products work, what risks they entail and how their prices come about, you should not buy them. Exchange fees are incurred when buying and selling ETCs. There are also ongoing administrative costs.

Gold Funds

The so-called gold funds must be clearly distinguished from gold equity funds. You are by no means exclusively investing in gold.

One does not invest – as one might initially assume – in shares of gold mines. Based purely on the term, one could initially assume that only gold is bought with the fund assets. But that is not the case either, as the gold funds approved for sale in Germany are only allowed to purchase gold directly to a certain extent. The rest of the fund’s assets are allocated to other forms of investment – for example, certificates or bonds. Some fund providers even forego investing in the raw material gold entirely and instead buy other investment products from the fund’s assets.

The fund should map the gold price so that investors should also benefit from rising prices. However, you have no guarantee that the fund manager’s requirements will work. The goal of mapping the gold price can also be missed. There is also the risk that the gold price itself will develop negatively.

The term gold fund is often used by providers and the press for gold stock funds. Investors should, therefore clarify precisely how their money is invested and how the respective investment product works. Gold funds are also managed funds that entail corresponding costs. High front-end loads and management fees are always a problem because they reduce returns.

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