Fund Fees – 4 Tips To Help You Save. Many mutual fund companies charge investors high annual fees for managing their mutual funds. In case which actively managed funds, the cost of passive index funds is typically five to ten times the yearly cost. The performance of expensive products is correspondingly worse.

What consumers can do to reduce annual and further costs can be found in the following four tips for saving :

TIP 1: BUY ETFs

ETFs, i.e. exchange-traded index funds. These funds are not actively managed, but only track an index – for example, the German DAX stock index or the American S&P 500 index. At the same time, the investment companies usually do not pay any commission for the sale of ETFs. Result: The index funds are significantly cheaper than their actively managed counterparts. There are only issue surcharges with ETF savings plans when buying on the stock exchange; only a volume-dependent fee is due. And the running costs are often less than 0.5% per year. The downside: even if the prices are relatively low – there is also a lot of room for improvement with ETFs in terms of fee transparency. And there are also a variety of newly invented ETFs mapping unique indices.

TIP 2: BUY FROM DIRECT BANKS AND FUND BROKERS

You can turn to direct bank aid if you want an actively managed fund, to at least reduce the front-end load that is due on the purchase. Such direct banks do not have their own branch network, so customers usually conduct their business with the bank over the Internet. The banks pass on the resulting cost advantages, at least in part to consumers – for example, in the form of reduced or eliminated sales charges. Direct banks often also work with so-called fund brokers. These usually offer a wide range of investment funds with no sales charge. A little research when deciding for or against a bank can, therefore be worthwhile for consumers. Because: Even when it comes to buying ETFs on the stock exchange or via savings plans, direct banks usually offer better conditions.

TIP 3: NEGOTIATE THE SUBSCRIPTION FEE

If you buy active funds and don’t want to change your bank, you can at least try to negotiate with your own bank about the amount of the issue surcharge when buying funds. Particularly with more considerable investment sums, there may be a discount. However, this does not eliminate the high running costs of the funds.

TIP 4: DON’T CHANGE HORSES TOO OFTEN

Basically: Nobody should regularly change investment products – because often new fees are incurred when buying or selling a new investment. The withholding tax on capital gains is also due when a profitable investment is sold – and reduces the return achieved. Therefore: Even if the seller urges the bank to change a fund, nobody should be put under pressure.

Dubious Investments On The Internet: How To Recognize A Pyramid Scheme. Great profit promises for small deposits: Pyramid schemes work by more and more people giving their money. But if the system stalls, the illegal business collapses.

The essentials in brief:

• Pyramid schemes are illegal, but this kind of advertising is often used on the Internet with supposedly high profits.
• Usually, they run out of breath quickly – and then only a few have made money.
• We give clues on how you can recognize the forbidden mesh.

High yields and permanent “passive income”: so-called pyramid schemes are advertised with impressive profit margins – now mostly online. Questionable providers use terms such as “donation”, “retirement provision”, “marketing” or “crowdfunding” to advertise on social networks and the Internet.

ATTENTION, PYRAMID SCHEMES!

Speedball systems are not designed for a long time. Only those who have started the whole thing and cash in on investments can benefit. Everyone else will likely lose their stake.

The consumer centres have complained about various providers from eleven federal states. Because of these complaints, the market watchdog finances took a closer look at the websites of over 50 providers: the imprint was missing in more than half of the cases. More than two-thirds of the Internet domains examined are registered abroad, several of them with the same box address in Panama. This makes it incredibly difficult for those affected to enforce their rights here.

FOR EVERY NEW PARTICIPANT THERE IS A “BOUNTY”

The research by the market watchdog team also showed that alike under a post on Facebook is sufficient to be contacted directly by the provider. Cell phone numbers, for example, are exchanged via Facebook Messenger, which give access to WhatsApp groups. The market watchdog experts at the Hessen Consumer Advice Center, therefore warn against fraudulent offers that present themselves online as simple, reputable and high-yield investments.

TIP FOR YOU! Consumers are increasingly complaining about providers who lure them into dubious investments with deals in Bitcoins and other cryptocurrencies. The market watchdog experts at the Hessen Consumer Center are currently investigating complaints about almost 20 different providers and six currencies. Illegal pyramid schemes could also be hidden behind such offers.

WHAT IS A PYRAMID SCHEME?

A snowball system is a term used to describe business models that require a steadily growing number of participants in order to function, for whom you get a “bounty”, analogous to a snowball that rolls down the slope and expands steadily. Profits for attendees come almost exclusively from attracting new attendees who in turn, invest money without receiving any service or product. A rapid spread brings money into the system like a flash in the pan. But it is over just as quickly – the growth in new members cannot last long.

HOW TO RECOGNIZE PYRAMID SCHEMES

From the outside, pyramid schemes should look serious. The initiators are often veiled. In addition, it remains unclear at which stage the respective system is currently.

Since the number of participants would have to increase exponentially, the collapse is inevitable. So how do you know where not to invest money?

• Do not trust supposedly brilliant business ideas that can be explained quickly. From the sofa, you cannot merely increase money on the computer by persuading other people to participate.
• Usually, you should be able to start with relatively small amounts – a few hundred euros sound like a manageable risk.
• Pyramid schemes are always designed to increase the number of participants sharply. You will be pushed to recruit many new members, for each of whom you will receive “bounties”.
• Typical: A commission always goes to the initiator. In the end, he is the only real winner. Often it is not even clear what the money is being used for – then you should be particularly careful.
• You should often be able to reach different levels or positions according to which your profit is based. Sole purpose: You should try to involve more and more people and their money.

Equities Questions And Answers About Dividends. The dividend belongs to the share like the interest to the fixed deposit. Companies that have managed to pay dividends to their shareholders over decades regularly are proud of it and advertise with it. Foundations and business families depend on their annual dividends. And it is also essential for many small investors.

What is a dividend?

The dividend is the part of the profit that a stock corporation pays out to its owners – that is, to the shareholders. That is why stocks are sometimes called equity securities.

How often is the dividend paid?

Most companies pay a dividend once a year. Others distribute part of their profit over the year – for example, they pay a dividend every quarter. Finally, there are those companies that don’t pay dividends at all. This may be because they are only not making a profit to distribute. But it can also be a strategy. Such a process can be useful for several reasons. One reason: the assumption that the money generates a higher return if you leave it in the company and use it for investments. Another: possible tax advantages for shareholders.

What types of dividends are there?

It is customary to distribute profits as a cash dividend: a predetermined amount is credited to the shareholder’s account for each share.

There is also the so-called stock dividend. “Stock” is the English word for share. A stock dividend thus describes the distribution of a dividend in the form of shares. Instead of cash in the account, a shareholder has additional shares of his company in his custody account after such distribution.

It is also possible to distribute material assets. This could be, for example, shares in a subsidiary that a company wants to spin-off. The shareholders then own two separate companies. Such a dividend is also known as a dividend in kind.

Who decides on the distribution of a dividend?

The owners themselves – at the annual general meeting of their stock corporation. Before that, however, the board will make a dividend proposal. Most of the shareholders agree to this proposal. Usually, the dividend is paid out directly on the day of the general meeting.

What do I have to do to have the dividend credited to me?

Nothing. It will be automatically posted to your account. It is possible, however, that you have to apply for the cash dividend to be exchanged for a stock dividend – if your company offers this option (and you want to take advantage of it).

Because of the dividend, is it worth buying the stock the day before the distribution and then selling it straight away?

No. The stock market cannot be tricked that easily. When the dividend is distributed, the share is traded “ex-dividend”, i.e. without the amount distributed. The share price falls accordingly. That is logical; after all, the company has less capital after the distribution – it sinks in value.

But maybe it is then worth speculating that the share price will fall because of the dividend distribution?

No, it’s not worth it either. Because the providers of warrants and certificates, with which private investors can speculate on falling prices, include the dividend payments in the costs of the speculative instruments. That means: Such papers do not rise because of the dividend distribution.

What is the dividend yield?

The dividend yield is a crucial figure for assessing stocks. It is obtained by dividing the amount of the dividend per share by the share price and multiplying the result by 100.

Many investment strategies place particular emphasis on dividend yields, and several funds invest in stocks with exceptionally high dividend yields. Even so, the fact that a stock has a high dividend yield does not necessarily mean that it is an enormously profitable investment: Market participants may expect the company’s profits (and thus dividends) to be lower in the future. Or, conversely, they expect companies that have not yet paid any dividends to make exceptionally high profits in the future and pass them on to investors. So there are many reasons not to (only) rely on this metric when buying stocks or equity funds.

Can I find information about the dividend on my shares?

The dividends paid in recent years are listed in various finance portals on the Internet.

Also, estimates of future dividends are often published. The calculations are based on forecasts by stock analysts. These should be enjoyed with caution; after all, nobody knows the future – not even the best-paid experts.

What do equity funds do with the dividends that are paid to them?

Equity funds collect dividends first. You then pass them on to the shareholders. This can be done through a distribution. In this case, money flows into the accounts of the fund owners. Or it can be done through an accumulation. In this case, the fund reinvests the dividends received, and the price of an individual share increases accordingly.

What are bitcoins?

Bitcoins: Shopping With Virtual Money. Bitcoins are a virtual means of payment. This digital currency was introduced by private individuals in 2009 and is intended to be an alternative to the conventional monetary system. Bitcoins are independent of governments and central banks. Instead, they are generated locally by computers using a cryptographic formula. Encryption techniques are used to make it impossible to copy or falsify this Internet currency. The total amount of electronic money is limited to 21 million units. Among other things, this is intended to put a stop to bitcoin inflation from the outset. However, the limit ultimately also means that not only people who see the new currency as a pure means of payment use Bitcoins but even speculators who hope for price gains from the digital currency.

At the beginning of August 2017, there was a division into “Bitcoin” and “Bitcoin Cash”. Ultimately, different views within the Bitcoin community led to the division. As more and more users are using Bitcoins, the technical processes that are supposed to make the transactions transparent and secure ensure that only around seven transactions per second are possible. In practice, it can, therefore happen that a transfer can only be carried out after several hours have elapsed. A group of developers is thus introducing “Bitcoin Cash”. A higher storage capacity should ensure faster processing.

In practice, this leads to a fork or split in the digital currency. Anyone who wants to pay with digital currency must in future pay close attention to whether they wish to do so with “Bitcoin” or “Bitcoin Cash”. And whether the online service through which the payment is to be made enables this. The further development and especially the impact of the division must be awaited.

With “Bitcoin Private” and “Bitcoin Gold” there were two more forks in October 2017 and February 2018, respectively.

Consumers are increasingly complaining about providers who lure them into dubious investments with deals in Bitcoins and other cryptocurrencies. The market watchdog experts at the Hessen consumer centre are currently investigating complaints about almost 20 different providers and six currencies. Prohibited pyramid schemes could be hidden behind such offers .

Acquisition of bitcoins

Bitcoins can be bought on individual exchanges at the current price. Alternatively, they can also be purchased by other users on certain trading platforms and marketplaces. Theoretically, interested parties can also make computing capacity available to generate the bitcoins and thus access the digital currency. Since, however, correspondingly powerful computers are required for this, this approach is usually ruled out.

How are bitcoins secured?

Technically, the encryption techniques mentioned are supposed to guarantee security; the virtual currency is not legally protected at all. Bitcoins, indeed, are not legal tender and are not controlled by any central bank, government or regulatory agency. So whoever buys Bitcoins is relying solely on trust? on the belief that someone else will accept this internet currency. However, there is no legal claim to this. If you want to use Bitcoins as a means of payment, you should make sure that the contractual partner also accepts Bitcoins before buying. For Bitcoins, there is neither deposit protection nor protection via a gold standard or any other security.

Anyone who views Bitcoins not only as a means of payment but also as a possible financial investment should therefore bear in mind that the capital invested in Bitcoins is generally at risk of the total loss.

Where can bitcoins be used?

From the basic idea, Bitcoins are primarily intended for online purchases. In the meantime, however, the digital currency is no longer only accepted by a few internet shops, individual service providers and retailers also use virtual money. Even though the adoption of bitcoins has increased over the years, the number of companies that accept this electronic money is still manageable. Users should, therefore, not be able to rely on being able to pay an outstanding amount with bitcoins.

HISTORICAL DEVELOPMENT

The story began in 2009 when private individuals introduced Bitcoins as an alternative to traditional payment methods. After the first exchange rates formed in 2010, users were initially able to purchase Bitcoins for rates below ten US dollars. In 2013 the course sale took an adventurous course. After various price increases and decreases, the bitcoins reached a record value of over 1,200 US dollars in November 2013. Then a downward movement set in, with Bitcoins losing more than half of their value within a short time. Until the division into “Bitcoin” and “Bitcoin Cash” in August 2017, the digital currency finally rose to a rate of around 2,700 US dollars. In December 2017, the virtual currency rose to just under 20,000 US dollars in only a few weeks,

Bitcoins are not only traded in US dollars, but also other currencies such as euros or yen.

Massive price fluctuations

Bitcoins are not only characterized by significant price movements within a year. Significant fluctuations within a single day are also not uncommon. This shows an example of the development on the following two days: Anyone who invests in Bitcoins can more than double their invested capital in a short time, but conversely, they can also lose more than half. With Bitcoins, even a total loss is possible.

1. Be sceptical of salespeople

The Basics Of Investing. Bank advisors and other financial intermediaries are usually paid on a commission basis. So you are a seller. You must therefore assume that these advisors will only recommend products to you that the sellers make ample money on. Of course, this also applies to the savings bank advisor, even if he does not earn anything personally from the sale. Savings banks and Volksbanks also sell in-house products or products from third parties with appropriate sales cooperation and set sales targets for their employees. What can you do about it? Nothing. You can ask advice from other competitors who are also sellers and who may then suggest additional products to you, but that doesn’t exactly make it easier to make a decision. If you want to structure your own opinion, you can fall back on independent sources, for example, test reports from Stiftung Warentest and advice from consumer organizations.

2. Take a critical look at past performance

We know it: To sell you a product, you will be presented with beautiful graphics with upward curves. You are told that this has been the development so far, that it is a top grade paper with which you can practically only win.

ATTENTION! No expert in the world can predict how security will develop in the future. It has long been a well-documented truism among researchers that the forecasts of experts and analysts are minimum as often wrong as they are correct.

If someone says the opposite in the consultation, then you should get up and leave immediately. Such forecasts are only ever used for the sale of products and the constant switching of securities. They have nothing to do with serious advice, which should always value appropriate risk diversification.

3. Minimize costs and commissions

Costs and commissions reduce the return you can get from an investment. The costs are individual, and you always have to pay them, while interest income and favourable price developments are often uncertain.

Different costs arise depending on the investment product. You can find an overview of different product types in our guide Avoid unnecessarily high costs for financial products. In principle, you can negotiate commissions (also: donations). By the way, funds and other products still incur fees after they have been sold. You can find the annual fees in the so-called key investor information sheet (also: key information sheet, product information)under “Running costs”. Because of a sales follow-up commission, which the fund company pays to the bank, your bank will automatically continue to earn from you even after the sales pitch. In the case of closed investments, up to twenty per cent of the deposits disappear because of the costs, which then almost nullifies any prospect of positive income.

So look carefully and ask if in doubt. The cost burden is one of the most important criteria for assessing investment products. Even the brightest performance in the past and the rosiest forecasts for the future should not deter you from taking a sober look at costs. There are also cheap products with no commissions. But don’t expect a seller to recommend them to you.

4. Document what your investment advisor advises you

Most of the people cannot or do not want to look after their assets entirely independently and without advice. Many go to a bank or what is known as an independent consultant, who can and must also only sell products. Some even turn to fee advisors or robot advisors who are paid by the customer and do not earn anything from product sales.

Whoever you turn to, the advice remains a matter of trust. Anyone who needs advice doesn’t know any better than the consultant and can therefore not evaluate whether the consultant is doing his job well. A checklist with which you can inquire about qualifications, for example, does not help. If you want your trust, you should earn it. Make this clear to your advisor. This assumes that your advisor is 100 per cent behind what he said to you in the conversation.

5. Check your goals and strategies regularly

You have clarified your goals, obtained sufficient information and made an informed investment decision. And now?

As a rule, it makes no sense to reallocate your systems every few months, because it only creates new costs. An old stock market adage rightly states: “Back and forth makes pockets empty”.

Even so, you should check your finances regularly. Because life situations can change, unforeseen events can occur. After some time or after an inheritance, the focus may no longer be on the return, but above all on liquidity, because your plans have changed and you need to dispose of the money quickly.

The Basics Of Investing. Investing is a complicated subject. And one that poses many dangers for careless and inexperienced investors. Nonetheless, if you follow the simple rules of our little investment table, you will be well equipped to avoid the worst investment traps and invest your money successfully.

Here are the ten principles to keep in mind when investing money:

1. Make your goals clear to yourself

It sounds banal that you have to be clear about your goals before investing. An intensive examination of one’s own goals is by no means a matter, of course. But it is essential for good planning and the right decision. Take your time and write down what you expect from your investment – and from your life situation. Are you planning to make major purchases in the medium or long term? Are you planning to move, or do you want to start a family? Perhaps your professional situation is uncertain, or you are about to retire? Will you have higher or lower monthly charges in the future? Are you financially stable or is the overall situation uncertain and the future difficult to predict? Do you want to invest money once or would you prefer to save something monthly? Divide up your funds: do you want to invest part of it long-term and still have it available if necessary?

The investments must match your individual goals. So think about where your priorities lie: is it the high return, is it available at all times or is it absolute security? No investment can achieve these three goals at the same time. You can only expect high returns by foregoing availability or security.

2. Debt settlement has priority over investments

Before you invest, consider one thing: credit and debts are expensive. They generally cost more interest than you can get by investing the same amount. For you, this means that you should always try to reduce debts first before investing money elsewhere. Paying off loans and advances is usually the best investment you can make. Of course, some of the exceptions for it, as an example; when taxes lower the bottom line, which can be the case with rented real estate. Some old home loan and savings contracts offer returns of up to 4 per cent because of the bonus interest, and classic life insurance policies that were taken out up to 2004 have tax advantages and, depending on the provider, the guaranteed income after costs can still reach around two or even 3 per cent. Anyone who is debt-free and has a sufficiently high reserve also avoids over drafting the current account in the future if damage in the household or car needs to be replaced or repaired.

3. Insurance can protect assets

Certain events can have serious financial consequences. The most solid financial investment can vanish in no time if you are liable for damage to your own assets, for example. If you are the family leader and took after your family, you may not want to drive them into financial difficulties if they die unexpectedly or if they can no longer work due to illness or accident. Keep these risks in mind. Many of them are well protected in our welfare state, but not always to the extent that enables them to maintain the standard of living they are accustomed to.

Anyone who does not want to endanger the standard of living by the occurrence of certain risks can buy an appropriate insurance cover. Only you know which risks you want to cover and which risk protection you feel more comfortable with.

Also, consider how high insurance coverage should be. Do the surviving dependents have to be provided for until they retire, for example, or is five years enough because this period is sufficient to adjust to the new situation? Avoid rules of thumb and checklists that sellers like to use. Your personal needs are the only decisive factor.

4. Can and do you want to take risks?

If you take more risk, then it leads to higher returns. So the risk is not something that is bad per se. And security has its price, the yields are then simply lower, at the moment, with luck, you can just manage to compensate for inflation, i.e. maintain the purchasing power of your money. It is therefore crucial to dose the risk in such a way that you feel comfortable with it. The number of potential losses should be clear to you, and you should be able to handle them. With our online return calculator, you can get a feel for the income opportunities and risks of different investments. It is vital to know and note that this only applies if you invest widely in stocks. More on this in the next step. In connection with the personal willingness to take risks, the risk-bearing capacity is also important. Because not everyone who would like to have a higher return can also afford a higher risk due to the life situation. Anyone who has to live with the assets should generally avoid fluctuations in value unless the assets are so large that the fluctuations are irrelevant.

5. Spread the risks

Regardless of whether you want to invest a large amount of money one-off or just a small monthly savings contract: spread the risks! Capital markets always harbour risks, even if the newspapers paint a bright future. Stock prices can always collapse, and interest rates can turn at any time. But don’t confuse risk diversification with simply buying multiple products. Those who only have savings bonds, overnight money and bank savings plans do not spread the risks! Rather, what matters is the asset class that you represent with the product.

THE FOLLOWING ARE BASICALLY AVAILABLE:

• Participations in companies, in the form of shares or, even more widely, in the form of global equity index funds (ETFs). You can find out how this works and how you can use index funds (ETFs) here.
• Debt, often called monetary assets. All loans fall into this category, including overnight money, savings bonds, government bonds and pension funds. Classic life insurances also fall into this category, as they mainly buy debt securities from governments and banks.
• Real estate, in the form of your own home, rented property or in the form of open real estate funds and real estate investment trusts (REITs), which also offer access to this asset class for small amounts. Beware of closed real estate funds.
• Speculative values ​​, such as raw materials or precious metals. These investments offer no interest, and their performance is highly uncertain. However, gold is probably one of the oldest means of payment of mankind, and every paper currency (category: debt) has survived. Information on investing in gold can be found here.

The asset classes usually develop differently. For example, when stocks tend to weaken, bonds have often been ahead in the past – and vice versa. When the value of stocks and debt collapsed worldwide during the financial crisis, the gold price boomed. Spread your assets across all of these asset classes, then you practically eliminate the risk of total loss and stabilize the total return. The spread of risk is also called diversification.