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Does the arrival of spring make you want to buy a new vehicle? The process of buying a car is rarely done without financing. Do you find the field of car loans complex? To help you understand the basics of financing at a car dealership and get your bearings, here’s some information. Already ready for a purchase, apply now!

Credit rating: the basis of your loan
The first step is to validate your credit rating. This is the basis for all loans. The higher your “score”, the easier it will be to get a loan for your future car. What is it based on? If you are a good payer (e.g., cell phone payments, credit card payments, etc.), your score will remain at a good level. As a general rule, if you have access to credit and your payments have been made on time, you will find it fairly easy to obtain the financing you need for your purchase.

  1. I have never obtained credit
    If you have never applied for financing, there are several ways to access credit, the two most common being

Option 1: Use a co-applicant (endorser)

The dealer will check the credit rating of your co-applicant. To endorse you, he or she will need to:

Have a good credit history ;
commit to guarantee the loan in case of default;
In addition, you should know that the endorsed loan will appear on your credit report as well as theirs.

Option 2: Join the First Time Buyer Program (when available)

This program allows you to obtain financing, provided you meet certain criteria (which vary from one manufacturer to another).

For example, the applicant may have to :

Provide proof of employment for at least 3 months and proof of income;
deposit an amount of cash;
respect a maximum amount to borrow for a first loan.

Did you know that? Applying for credit several times in a short period of time can hurt your credit rating. For example, applying for a car loan, furniture, a house, credit cards in too many applications in a short period of time can make future creditors more cautious.

  1. I’ve had trouble with my credit rating in the past
    Have you borrowed in the past, but were unable to meet your payment obligations? It is still possible for you to obtain a loan through your dealer’s second and third chance credit. Of course, a variety of different criteria must be met, depending on the financial institution. For example, obtaining the loan could be conditional on the signature of a co-applicant or a considerable down payment to demonstrate your commitment. Did you know that? A second or third chance credit loan can help you gradually rebuild your credit rating. Financing a vehicle, considered a long-term loan, will show creditors your good will to respect your commitments. However, you must be rigorous and maintain your payments until the end of the loan!
  2. Interest rates: what are the differences?
    There are 2 types of rates, usually associated respectively with the purchase of a new car and a used car.

Preferred rates

Usually reserved for new vehicles, most manufacturers’ rates are between 0% and 3.99%. The interest rate offered at the time of your purchase will be set by the manufacturer depending on the model of vehicle chosen and the term. It will be approximately the same across Canada.

Standard rates

Usually reserved for used vehicles, they vary between 3.69% and 9.99%.

Three main criteria usually determine the standard rates, which can be fixed or variable depending on the financial institution:

The year of the vehicle: from a certain year, fixed by the financial institution, the rate could be increased.
The total amount to be financed: for example, certain interest rates are only available for amounts financed of $7,500 or more.
The term: sometimes a rate increase may be necessary if the term is longer than a certain number of months.

Obtaining the loan at the dealership
Financing is always available at the dealership. It allows you to :

be accompanied in case of problems with the loan;
centralize the entire purchasing process in one place;
add loan insurance to your financing or lease that protects you in the event of death, accident, illness or critical illness.
Did you know that? When it comes to financing, it’s the finance managers of the dealerships you’ll meet. They are professionals supervised by the Autorité des marchés financiers (AMF) who are subject to several rules and practices that are frequently verified.

  1. How are repayment terms and payments set?
    To establish a term that suits you, you will have to rely on your personal budget and the management of your finances. If your credit rating is good, it will be up to you to set the amount you can pay per year and determine the payment terms. Choosing a payment frequency, weekly, biweekly or monthly, will not make a big difference on the interest paid in the end.

You can then think about the term: that is, how many months you would like to pay off your loan. Sometimes you may want to pay off your payment over a longer period of time to get the vehicle model you want with the monthly payment you originally set. Consider also the possibility of giving a cash amount, or leaving your vehicle in exchange, to adapt your monthly payment to your initial budget. In the case where the dealer takes back your vehicle in exchange, this allows for tax savings. An advisor on site will be able to offer you several options in order to obtain the monthly payment that suits your budget.

Did you know that ? Not all financing terms (weekly, bi-weekly, semi-monthly and monthly) are offered at all financial institutions. It is therefore necessary to make arrangements in advance and to validate the options offered at the dealership in question.

  1. What happens if I want to sell my vehicle before it is fully paid off?
    If you wish to sell your vehicle, there are several options available to you, the two most common of which are

Option 1: Leave the vehicle in trade-in at the dealership when you purchase or lease a new vehicle.

If there is still a lien (i.e. there is still an active balance on the loan) on the trade-in vehicle, the dealer will send a check directly to the original financial institution.

Did you know that? Although the dealer often gives you less than market value since your vehicle is dedicated to resale, you may save taxes on your purchase. For example, if your new vehicle costs $40,000 and the dealer gives you $10,000 for your old vehicle, you will only pay sales tax on $30,000. Plus, it’s a good option if you don’t want to deal with the headache of selling to a private party!
Option 2: Selling to a private individual

When selling to a private individual, you must ensure that you have repaid your loan in full. There are several rules governing the sale to a private individual, particularly with regard to the QST. Ask the SAAQ in advance to avoid unpleasant surprises.

Did you know that? A buyer could (and should) ask you for proof that the vehicle is duty free, i.e. that the debt is fully paid at the time of purchase. He may ask you for an official document from the Register of Personal and Movable Real Rights (RPMRR). You will have to pay $9 and enter your serial number to obtain it.

What you need to remember when buying a vehicle from a dealer
Buying a vehicle at a dealership means talking to an advisor who can guide you. Do not hesitate to clearly express your needs and your budget from the start. By having this basic information, they will be better equipped to help you buy the vehicle that meets your needs and budget. It’s their job to help you feel good about your purchase! Ready to get financing for the vehicle you want? Apply today!

A number of current and historical financial elements are considered to determine if you qualify for a mortgage. However, there are certain absolute factors that influence whether a bank will make this loan. To qualify, you should be willing to invest a certain amount of cash for a down payment, provide proof of income, a satisfactory credit history and score, and demonstrate that there is sufficient money available for mortgage payments.

A mortgage is a loan from a financial institution, primarily a bank. The average person cannot buy a home by paying cash at the same time, so mortgages can make homeownership possible in many places. To qualify as an attractive candidate for a mortgage, you must meet certain requirements to qualify for a mortgage.

Typically, not all of the purchase price of a new home is financed, which means that a loan must be coupled with some of the buyer’s cash in order for a sale to take place. There may be a minimum down payment based on several factors, such as whether your first mortgage, your credit score, and your external market and economic factors may affect the real estate market. You may need to save up to 20 percent of the amount you plan to spend on a home before you can qualify for a mortgage.

Lenders value proof of employment and a stable income, and this will help you qualify for a mortgage. Be prepared to provide the lending institution with your pay stubs or proof of employment for the past two years. If there are other means of income, bring proof as well. The banker will look for consistency with a particular job or within the industry in which you are employed. This provides the banker with some level of assurance that the funds can and will be repaid and that enough money will come in so that you can afford the mortgage payments.

A solid credit score reflects fiscal responsibility and consistency. This component is required for you to qualify for a mortgage. The better your credit score, the better the interest rate associated with a loan. If your credit score is below average, there are programs available to help you improve your credit. Typically, an increasing score can reflect signs of improvement within a few years.

The experts at the British bank and financial company Standard Chartered predict that the Bitcoin price will double by the beginning of 2022 at the latest. They also believe that Bitcoin will reach a price of around 100,000 US dollars by the end of this year. A strong Bitcoin would probably also bring a steep rise in Ethereum.

  • Standard Chartered experts see Bitcoin at 100,000 US dollars by early 2022
  • Longer-term price target is 175,000 US dollars
  • Industry experts also see decent potential for Ethereum
    Industry experts are confident
    A new cryptocurrency research team at Standard Chartered sees plenty of potential for bitcoin in the coming months, according to Reuters news agency. Later this year or early next year, they see bitcoin at a price of around $100,000. In the longer term, the experts even consider a value of 175,000 US dollars per Bitcoin to be realistic. Bitcoin could become the leading peer-to-peer payment method for non-bank customers worldwide, according to the research team led by Geoffrey Kendrick. After bitcoin and other cryptocurrencies spent the last few weeks staging a strong recovery rally, last Tuesday saw another sharp setback. El Salvador had become the first country in the world to approve bitcoin as an official currency. However, the launch failed and there were some problems, whereupon the prices of Bitcoin and other popular cryptocurrencies also dropped, according to Sandra Schuffelen from Handelsblatt.

Ethereum would benefit from a strong bitcoin


With bitcoin targeting $175,000 in the medium to long term, the second largest cryptocurrency, Ethereum, should be able to follow along in parallel to a value of $26,000 to $35,000, according to the Standard Chartered team. That would currently correspond to about a tenfold increase in the Ethereum price. Furthermore, the experts highlight the transition to Ethereum 2.0 as the move from proof-of-work to proof-of-stake has obvious environmental benefits. The excessive energy required for mining would be eliminated, which could make the cryptocurrency even more popular with investors in the future. The process is expected to be converted in the first half of 2022, Geoffrey Kendrick said. But Ethereum should not be equated with bitcoin despite everything, he said, as regulatory concerns about the two cyberdevices differ, for example.


Future prospects for the crypto market


Speaking to Financial News, Kendrick added that Standard Chartered, as a bank, is also becoming more open to cryptocurrencies. He added that this is how many other banks around the world are doing it. He himself hopes that crypto-assets will play a bigger role in the future and that banks themselves will start trading, as the interest from customers is already there. The gap between traditional finance and the digital world is getting smaller by the day, he said. The expert is sure that many countries in the world will be completely cashless in 10-20 years, from which Bitcoin, Ethereum and Co would benefit.
Curious, investors will also follow the next week the developments on the crypto market. Whether Standard Chartered is right with its price target and whether the most popular cyber currencies will soon reach new highs remains to be seen.

Anyone who, as a real estate buyer, becomes a member of a homeowners association also benefits from their maintenance reserve. However, this is not directly attributable to any owner. It follows from this that it cannot reduce the assessment base for real estate transfer tax.

Whether it’s your own home or commercial property – for years prices seem to have only known one direction: up. But the purchase price alone is not enough. Finally, there are also numerous ancillary costs that are particularly painful for future owners, especially in times of high real estate prices. So the desire to keep this additional burden as low as possible is understandable. A critical look at the calculation bases can sometimes – if not always – be helpful.

The share of the maintenance reserve does not reduce the assessment basis

The buyer of various partial property rights had no success in his efforts to reduce the real estate transfer tax to be paid. The responsible tax office had calculated the levy from the purchase price of 40,000 dollars, which the partial ownership in connection with separate ownership of four commercial units and nine underground parking spaces had cost. The portion of the maintenance reserve of around 15,000 dollars, which had also passed to the buyer, was not taken into account. In his opinion, however, this amount should have reduced the assessment base, so that the purchase price for the 13 properties considered individually remained below the value limit of 2,500 dollars and the acquisition would have been tax-free.

Membership in apartment owners’ association

It is legally stipulated that the purchaser also becomes a member of the homeowners association when purchasing partial property. Instead, their acquisition is inextricably linked with ownership of the real estate share . Their value is therefore included in the entire purchase price and can hardly be determined separately.

PRACTICAL TIP: ADDITIONAL COSTS WHEN BUYING REAL ESTATE

In addition to the high purchase prices for real estate in many regions for years, buyers have to face some additional costs. Notary fees and land registry fees always have to be paid. Around two percent of the purchase price should be estimated for this. The real estate transfer tax is also due. This depends on the federal state in which the newly acquired property is located and is between 3.5 and 6.5 percent of the purchase price. Anyone hiring a real estate agent to search for a property pays 5 to 7 percent of the purchase price, half of which is borne by the seller. An expert opinion , which is particularly important for older properties, costs around 1,500 to 3,000 dollars. Ancillary costs of the property purchase can only be claimed for tax purposes if the buyer rent out the property or use it commercially . Anyone who moves into their own home or apartment must bear the full costs themselves.

Trading stocks, buying bonds or fund units – that is only possible with a securities account. Especially now in times of low interest rates, the stock market is a sensible alternative to traditional asset accumulation. To get into stock trading, you have to open your own account beforehand. Here you can find out everything you need to know about the securities account.

What is a securities account?

A securities account is practically an account for securities. Shares, bonds, ETFs, shares in investment funds, etc. can be managed, bought and sold via the depot. Thus, the securities account is a prerequisite for trading in securities.

A securities account is comparable to a current account. While the current account gives you the opportunity to participate in payment transactions, you can trade securities with a securities account. Your custody account is also the place where you centrally manage all of your securities. Depots are predominantly digital today. This also applies to trading in securities, which is carried out over the Internet at trading venues around the world.

If you want to buy shares or other securities, place your buy or sell order through your securities account. The custodian bank executes this order for you as a broker via a clearing account. It buys or sells securities on your behalf via the trading systems of the respective stock exchanges. If you buy securities, the amount required will be debited from your reference account, a current account or a clearing account. If you sell securities, the proceeds are paid to a reference account.

Settlement account vs. current account

A current account is your prerequisite for participating in cashless payment transactions. For this you use the giro card (debit card), among other things. The clearing account, on the other hand, is only used for securities trading. Payment from a clearing account can only be made to a specified reference account.

Where can I open a depot?

… that the term “depot” comes from French and means “warehouse”? In the past, the “depository” for securities was actually a real small warehouse in a bank. The securities were kept safe there. Today, securities accounts are predominantly digital and, in addition to the administration of securities, also offer the possibility of participating in securities trading. You can open a securities account today at any bank that offers such a product for its customers. In the case of branch banks, the custody account is usually opened on site in a bank branch.

The advantage of online securities trading is that you have access to your securities account at any time, regardless of where you are, and that you can trade shares and other securities around the world during business hours.

Another advantage of the online custody account: Due to the lower administrative effort, direct banks like us can offer you the custody account at very favorable conditions. In the first three years, for example, you do not pay us any fees for keeping a custody account.

Which securities can I trade with a securities account?

With a securities account you have the opportunity to buy and sell not only shares, but also other securities. These include bonds, shares in investment funds, ETFs, options and futures.

The portfolio can be individually tailored to your investment objective by selecting the respective asset classes and securities.

IMPORTANT TERMS RELATING TO THE SECURITIES ACCOUNT

  • Order: An order (also called a trade) is an order to buy or sell securities. The broker who is responsible for your securities account receives this order. Depending on whether the order concerns domestic or foreign securities, the term domestic or foreign order is used. Fees are due for each order, depending on the portfolio model.
  • Order fee: If you place an order with your securities account , a fee will be charged. The commission consists of a basic fee and a fee that depends on the stock exchange.
  • Broker: A broker accepts orders from customers to buy or sell securities on the stock exchange. For private customers, the broker is usually the custodian bank.
  • Sales charge: It is one-time fee that is payable when purchasing investment fund shares. And the fee is just based on the amount of the redemption price and serves to cover the distribution costs of the fund.
  • Limit: With a limit, share buyers can specify a price at which the share should be sold or bought.

What are the custody account costs?

There are fees associated with the sale and purchase of securities. On the one hand, so-called deposit fees are possible. These are comparable to charges for a current account. The custodian bank thus covers part of the administrative costs.

What are foreign currencies? – Definition and examples

Foreign currencies are basically foreign means of payment or currencies . Examples are the euro (a means of payment in several European countries), the US dollar (the currency in the USA) or the Turkish lira (the means of payment in Turkey).

GOOD TO KNOW:

Strictly speaking, foreign exchange is only understood to mean a credit balance in a foreign currency – i.e. securities, money substitutes such as checks or money in foreign bank accounts. Cash, on the other hand, is not referred to as a currency; there is a separate term for this: banknotes and coins in another currency are called sorts. Only when cash is deposited into a foreign currency account is it considered a currency.

How can you trade forex?

You have certainly already encountered foreign currencies on vacation if you have made cashless payments in a foreign currency. Apart from that, currencies are also a form of financial investment: they can be traded. Regulated trading is possible on the so-called foreign exchange market , also known as Forex (Foreign Exchange). Business runs around the clock, regardless of a stock exchange location, via computer systems. Often these are traded between 2 financial institutions (banks). Forward transactions in foreign currencies are also often carried out using this so-called interbank trade. In addition to the banks, companies, states, brokers and institutional investors are directly or indirectly among the market participants.

For private investors , trading via so-called “Forex brokers” is possible indirectly. With these brokers, contracts on foreign exchange can be traded. Alternatively, you can get into the forex business with special software without these external services. However, you cannot purchase these directly, you can only exchange them for another currency. How come? Trading always takes place in certain currency pairs. B. exchange for Canadian dollars, Swiss francs, New Zealand dollars, US dollars, Australian dollars or British pounds. In order to make a profit, the exchange rate fluctuations of foreign exchange are exploited with the foreign exchange speculation. However, this can be very risky: Losses or even total loss are possible.

Investments, warrants and currency certificates

In addition to direct investment in a currency and foreign exchange speculation, there are other options for entering into or trading in foreign exchange transactions. You can use your money e.g. B. invest with government or corporate bonds in foreign currencies. With currency certificates and warrants , you can bet on rising or falling rates of a currency without actually having to buy it. Another option are contracts for difference (CFDs) , with which you can speculate on the price development of a currency at short notice.

Forex trading: opportunities and risks

Investing money in foreign currencies harbors various opportunities and risks. If you decide to invest in this area, you should keep these in mind:

Foreign exchange offers these opportunities:

  • The purchasing power of one’s own financial assets can be preserved by exchanging for another currency if one’s own currency devalues ​​significantly
  • Forward exchange transactions offer the possibility of hedging exchange rate fluctuations

Possible risks of foreign exchange:

  • An unfavorable exchange rate development can result in losses when exchanging the foreign currency
  • Trading is highly speculative and the foreign exchange market is quite confusing: total losses are possible

What are foreign currencies: How are foreign exchange rates created?

The course is determined by several factors. However, it is primarily based on supply and demand on the currency markets. Other factors can include:

  • Demand for means of payment
  • Price level and goods
  • Inflation and economic development
  • Central bank key interest rates
  • Speculations and expectations of market participants

Foreign exchange rates and exchange rates – what’s the difference?

In everyday life one is more often confronted with the term “exchange rate”. For example, if you are visiting a foreign country with a different currency and need to exchange your money. But what is the difference between exchange rates and foreign exchange rates?

The exchange rates for exchanging cash are often slightly worse than the foreign exchange rates. That is because of the fact that the exchange offices or financial institutions charge a corresponding fee for their service.

The price of a foreign currency in the domestic currency in cash in the foreign country, on the other hand, is the exchange rate or the exchange rate . The term is particularly common when exchanging banknotes and coins from one currency to another. A fictional example: If you travel to Japan and exchange a 1 euro coin for Japanese currency there, you will receive cash of 125 yen (at a euro / yen exchange rate of 125). The distinction between foreign exchange and exchange rates is therefore almost entirely based on the approach. It can be stated, however, that foreign exchange rates are generally spoken of when currencies are exchanged electronically via foreign exchange trading. When exchanging cash, one usually speaks of exchange or currency exchange rates.

AT A GLANCE: WHAT ARE CURRENCIES

  • Foreign exchange refers to a credit balance in a foreign currency (securities, money substitutes such as checks, money in foreign bank accounts)
  • The topic becomes interesting when traveling to countries with their own local currency, but also when it comes to investments
  • Exchange rates include the domestic currency price for one unit of foreign currency. They are influenced by several factors such as: B. influences the economic development of a country.
  • Exchange rates or exchange rates are particularly relevant for exchanging cash for a foreign currency
  • The trade also offers by different rate developments potential returns, but the risk of loss

How does a securities savings plan work?

Anyone who opts for a securities savings plan first needs a securities account. Why? Safekeeping of the securities in the safe of the bank (wrapping paper) has not been common for a long time. Instead, securities are now practically only “virtually” in the securities account. Once you have opened the securities account, you can now start your securities savings plan.

NOTE: Securities are subject to certain price fluctuations. It is up to you; deciding continuously for a certain number of securities at a fluctuating price within the framework of the securities savings plan or for a fluctuating number of securities for a fixed monthly, bimonthly or quarterly amount. A securities savings plan, in which a fixed number of shares is purchased per month, for example, is not recommended because of the price fluctuations.

The most common way to save in securities is to buy a fixed amount of fund or index fund units each month, depending on the stock market price. An interesting effect is the so-called average cost effect. The average cost effect arises when savers regularly invest constant amounts in securities as part of their savings plan. In long run, it leads to a low average purchase price.

The fluctuating stock exchange prices mean that you buy more shares in one month and fewer in the next. In phases of economic growth, equity investments often offer more returns than fixed-income investments.

COMPOUND ANNUAL RETURN

The calculation is very simple: if an investor buys units cheaply and the prices rise in the long term, this leads to an above-average performance, which is ultimately reflected in the total return.

You can achieve a further boost in returns if you options for a fund for a fund savings plan that does not distribute the profits, but invests them again. This effect is nothing other than the compound interest effect in a savings book, in which the interest is not withdrawn, but is compounded again in the next year.

WHAT TYPES OF STOCK SAVINGS PLANS ARE THERE?

There are the following securities savings plan variants:

  • The private securities savings plan is not subject to any restrictions. You decide for yourself how long you want to save, whether you want to make special payments or sell shares during the savings phase. You are also free to choose your securities.
  • The VL savings plan in the form of a fund savings plan is very popular with savers, as they can accumulate a considerable amount with little effort. This becomes even more attractive if you meet the requirements for the employee savings allowance.

ICON PRICE INCREASE

TIP: The securities savings plan is also suitable as a savings plan for children due to the long-term investment horizon. Because in the long term, stocks and investment funds can often generate significantly more returns than savings accounts, fixed-term deposits or building society contracts, which currently hardly generate any interest anyway.

Who is a securities savings plan suitable for?

In principle, a securities savings plan is worthwhile for everyone who wants to build up assets over the long term and is not afraid that stock exchange prices are volatile – that is, they are subject to fluctuations and can even slide into the red in phases of economic weakness.

If you remain flexible and don’t want to decide how long you want to save, then you are well equipped with a private savings plan. This also enables you to make arbitrary special payments or, if necessary, to sell securities in between when you need liquidity. Would you prefer to use state subsidies for a supplementary pension or do you receive subsidies for VL savings from your employer? Then you can fall back on the legally regulated variants.

BUT BE CAREFUL: Securities are subject to fluctuations. If any price losses occur in the meantime during periods of economic downturn, you as a securities saver must also expect losses if you terminate the savings plan and liquidate the credit. It therefore makes sense to plan a long term of at least 10 or 15 years, during which the saved capital is not needed.

How safe is my money with a securities savings plan?

A clear distinction must be made here between investing in mutual funds and ETFs on the one hand and investing in individual stocks on the other. The risk of investing in individual stocks is that a single stock corporation can go bankrupt. As a shareholder, the investor then loses all of his invested capital.

In the case of a fund or ETF, this would only happen if all the companies in the fund went bankrupt on the same day without notice – a very unlikely scenario. Should the fund company itself become insolvent, this would have no effect on the investor. Funds are special assets that are managed separately from the capital of the fund company and are thus protected.

How does a fund savings plan work?

As an investor in a fund savings plan, you need a securities account that you can set up yourself with a bank, broker or fund company. At this point you should already think carefully about who you would like to set up your securities account with: For example, your room for maneuver in terms of fund selection is very limited with a fund company. If you want to change your investment focus here and consequently choose a fund from another company, you would have to open a new custody account. A custody account with a direct bank or broker gives you a lot more choice – here you can usually access a fund universe of several thousand funds from different companies.

But which funds are actually suitable for a fund savings plan? Here is a small list of the types of funds that you can use to realize your fund savings plan:

  • Equity funds
  • ETFs (listed index funds)
  • Bond funds (fixed income)
  • Mixed funds from stocks, bonds, certificates, real assets, etc.
  • Money market funds

When you have decided on a deposit and know which fund you want to save first, you should decide how high your savings rate should be.

Tip for choosing a deposit: Depots that are managed without an administrative fee are particularly attractive. This is often the case when shares are regularly acquired as part of a fund savings plan.

Who is a fund savings plan suitable for?

Fund savings plans are suitable for investors who want to achieve an above-average return for their money and are prepared to accept the risk of loss.

The long-term development of share prices compared to fixed-income investments speaks for itself – those who can “sit out” temporary economic crises and phases of economic weakness often achieve significantly more value growth with shares in the long term. Fund savings plans are suitable for investors who want to build up wealth in the medium and long term. It does not matter whether grandparents want to save for their grandchildren, employees want to invest capital-building benefits as profitably as possible, or whether the fund savings plan is used to build up private retirement provision.

Fund savings plans are not only suitable for friends of stocks. With the exception of money market funds, whose returns are too unattractive for a long-term investment, there are other funds available for cautious investors:

  • Mixed funds invest in various asset classes such as stocks, bonds, commodities, real estate, etc.
  • ETFs (Exchange Traded Funds) are exchange-oriented index funds that replicate a stock index
  • Pension funds invest customer money exclusively in bonds and rely on above-average returns in terms of purchase price and interest

What are the advantages of a fund savings plan?

Basically: Fund units are subject to price fluctuations. These are lower for bond, mixed and open real estate funds than for equity funds. Nevertheless, the average cost effect occurs: savers acquire a different number of fund shares every month with a fixed monthly savings rate. As a rule, this has a positive effect on the overall performance of the investment: There is usually a front-end load when purchasing investment fund units. This is a one-time fee that you have to pay when purchasing fund units. Many direct banks and online brokers offer attractive discounts here. And in the case of fund savings plans, many providers even forego the initial charge entirely.

The reason for this positive performance: When prices rise, the more cheaply bought shares show an above-average performance. So, in return the positive effect on the total return.

Mutual funds are often offered in a distributing and an accumulating variant. If you, as a fund saver, invest in a distributing fund, the interest and dividends on the securities contained in the fund are paid out to you annually. Accumulating funds, on the other hand, retain the dividend and interest income generated and reinvest them, which increases the value of your fund units. Accumulating funds are therefore well suited for investors who forego distributions and would prefer to save the largest possible fund assets.

Another big plus: fund savings plans allow the greatest possible flexibility. However, this statement only applies to savings plans that are not subject to any state subsidies. The classic savings plan has no time restrictions. There is neither a maximum duration nor a minimum duration. In addition, the fund savings plan allows all “usage options” in addition to regular savings: You can buy additional shares at will, suspend the deposit, increase it or reduce it to the minimum amount. You are also free to sell fund units if you need money for a purchase.

How safe is my money?

Funds that invest in volatile (fluctuating) values ​​such as stocks or bonds generally offer greater earnings opportunities, but also a higher risk due to possible price losses. If you are looking for high returns, you can invest in individual companies, industries or regions. As a more security-oriented investor, broadly diversified funds are available to you, which distribute your capital across different asset classes to minimize the risks. The fund shares you have acquired with the fund savings plan are, by the way, legally protected special assets that are not lost even if the fund company goes bankrupt. In this case, the custodian bank takes on the management of the investment fund.

Taxation with a fund savings plan

Investment income such as interest, dividends and realized capital gains are generally taxable, even if they are generated with a fund. The custodian institution automatically withholds 25% withholding tax plus solidarity surcharge and church tax on your capital income and pays this amount to the tax office. Your tax liability as a fund saver is thus settled. The tax rate is 15%. In return, investors sometimes do not have to pay any withholding tax on distributions and price gains from their funds. The amount of the tax-exempt income component depends on the type of investment fund . In the case of equity funds with at least 51% equity shares, 30% of the income is tax-free for the investor, in mixed funds with at least 25% equity share it is 15% of the income. 60% of income from real estate funds is tax-free, and 80% for funds with predominantly foreign real estate.

The profit lies in purchasing

There are definitely reasons to sit up and take notice when prices are falling – for example when a former stock market star crashes because the board of directors made strategic mistakes. Or if the company’s business model no longer fits in with the times. “However, the real value of the company is often not recognized by the market.  The current market value on the stock exchange reflects how valuable the majority of investors currently assess the company. This assessment sometimes contains a lot of fantasy for the future. This fantasy can come true later, but it doesn’t have to. The fair value, on the other hand, has taken out the imagination, so to speak. It corresponds to the total value of the individual parts of a company. That value would be redeemed if the company were sold in pieces.

What is value investing?

Value investors are the sniffer dogs and truffle hunters in the stock market. You trust in a particularly intensive fundamental analysis of the companies and search for stocks with earnings and substance at a preferential price.

  • The earnings-to-price ratio should be at least twice as high as the yield on an AAA bond.
  • The price-earnings ratio (P / E) should be less than approx. 40% of the highest P / E ratio in the past five years.
  • The dividend yield should be at least two-thirds the yield on an AAA bond.
  • The price / book value ratio should not exceed two thirds if possible.
  • The market capitalization should not exceed two thirds of the net working capital.
  • The outside capital should not exceed the equity.
  • Present assets should be at least double the amount of short-term liabilities.
  • Capital lent does not surpass twice the net working capital.
  • The average increase in earnings over the last ten years should be at least 7% .
  • In the past ten years, the profit may have decreased by a maximum of 5% or more compared to the previous year.

Value investors take action when a clear majority of these rules are met by a company. Graham’s most successful student is still active today.

What do value investors look out for?

Stocks that rank below their fair value are interesting for value investors. For a profitable sale, it is sufficient if more investors discover and invest in the potential of the shares in the future. On the other hand, price setbacks are less likely if the valuation was not previously inflated. T

  • a low price / earnings ratio (P / E),
  • an attractive price / book value ratio (P / B),
  • high and constant dividend yields.

What is the price / earnings ratio (P / E)?

The price / earnings ratio is the best known metric. The calculation is dividing the price of a share by the company’s earnings per share. With a share price of 60 dollars and earnings per share of 8 dollars, the P / E ratio is 7.5. Price / earnings ratios of less than ten are considered favorable.

 But sometimes they should be viewed with caution, because this metric is estimated based on the expected profits. Investors are currently paying attention to the P / E ratio for 2019. But the profit for 2019 is of course far from guaranteed.

The price-earnings ratio therefore lives to a large extent on comparisons. The current P / E of a share is regularly compared with its historical P / E values. Significant deviations can be due to significantly increased profit prospects or sharp drops in profits – or they can be based on an undervaluation or overvaluation of the share. A comparison within an industry also provides important information on the attractiveness of a share. With two similarly strong companies, value investors usually prefer the company with the lower P / E ratio.

What is the price / book value ratio (P / B)?

Almost all investors look at the P / E ratio, but the price / book value ratio (P / B) is particularly important to value investors. This key figure compares the share price with the book value per share, which is shown in the company’s balance sheet. The company would achieve book value if it were wound up and all assets were sold at market prices. Company debts are deducted from this.

The higher the P/B value, the more expensive a company is. A P/B below one, on the other hand, is a strong incentive to buy for value investors. The reason: The company is then worth less on the stock exchange than the sum of its individual parts. On the other hand, a low P/B alone is not enough for a buy recommendation, because it can have different causes: Sometimes the return prospects have deteriorated, sometimes a company is undervalued because investors have not yet discovered it.

Constant dividend yield

Value without a regular dividend is inconceivable; Because a valuable company includes regular, calculable distributions. Value investors therefore make clear demands on dividend policy. The distributions should be made very regularly and not out of substance. The absolute amount of the dividend is less important than a constant development of the distributions. In particular, dividend cuts or even dividend defaults deter value investors.

The overall picture counts

A single attractive indicator is not enough for value investors. Only when a low P/E ratio, attractive P/E ratio and good dividend yields are paired is the investment considered interesting. In most cases, they are right, as the long-term performance of the investments of recognized value investors.

The range of services offered by the banks covers the entire spectrum of savings products. However, the changing times do not stop at traditional savings plans – if building loan agreements and savings books were the favorites in the past, now they are certainly also securities savings plans.

How does a savings plan for children work?

The first step towards a savings plan for children is to open an account or deposit for the child. There are 2 options:

  • The person who sets up the savings plan – parents, grandparents or aunt and uncle – opens it in their own name. You can enter a right of disposal for the child as the beneficiary on a specific date.
  • The child savings plan is immediately set up in the child’s name. Because even if the child is not yet legally competent, it is still the legal owner of the credit. Parents are, of course, authorized to represent them until they are of legal age.

TIP: If you decide in favor of a securities savings plan, choose a bank that offers free custody accounts and waives the issue surcharge for investment funds.

Who is a child savings plan for?

Quite simply: for everyone who wants to build up a financial cushion for the youngsters at an early stage. Security-oriented savers can rely on classic savings plans with fixed interest rates. Opportunity-oriented investors, on the other hand, often achieve more returns with fund savings plans , but the risk of loss due to price fluctuations is also higher. Long-term planning makes it easier for you to build up your wealth and later on it will enable your child to more easily fulfill wishes such as a car or their own apartment. It is not specified who exactly is allowed to set up a savings plan for children. Of course, it is traditionally the parents or grandparents who set up a savings plan for their children or grandchildren. The sponsors can just as easily lay a financial foundation for their sponsored children.

What are the advantages of a savings plan for children?

In general, savings plans offer you the opportunity to gradually build up a small fortune through long-term, continuous savings. Parents whose children are studying know that studying can be expensive.  Another advantage of the savings plan for children is its flexibility, as it is not tied to a single financier or a specific monthly deposit. Whenever your child receives gifts of money – for a birthday, Christmas, confirmation or youth consecration – these can be included in the savings plan as special payments. You can also flexibly increase the savings contributions or limit them to the minimum amount if necessary. If your liquidity decreases, you can also suspend the savings. Of course, not every saver has the same investor mentality. This applies to your own savings plans as well as to a savings plan in favor of third parties. Grandparents may be more cautious when it comes to a savings plan for children and prefer to invest the money, for example, in a building society contract or a call money account, with call money accounts having a clear advantage over the savings account as a target account: If the money is needed, the beneficiary can use the entire amount in one sum feature. Advance interest will be charged on the excess amount. Parents who trade in stocks and trust in the financial markets tend to rely on investment funds with a broadly diversified risk due to the long term.

But, you should know that when investing in a call money account: Due to the long term, inflation has an impact on asset development. In short: Those who rely purely on overnight money risk a massive loss of returns.

How safe is your money with a child savings plan?

Wondering if your money is safe with a child savings plan? It depends on the form chosen. If you have opted for a savings plan in favor of a savings book, a call money account or a building society contract, your balance is subject to the so-called “deposit protection”, which amounts to at least 100,000 dollars per saver and bank.

But even if you have decided on an investment savings plan as a savings plan for children, your money is safe, because the customer money that is invested in fund shares is part of the fund company’s special assets. These special assets must be kept separate from the equity of the fund company and will not be included in the bankruptcy estate in the event of bankruptcy. The fund continues to exist regardless of the existence of the fund company and can be continued by another manager. There is, however, one risk factor: Funds and stocks are generally subject to price fluctuations.

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