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Lydia Biel

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A bond, a security for which the investor usually receives interest. With a bond, the investor gives the issuer of the bond a certain amount for a certain period of time. So when you buy a debt security, you are ultimately giving the issuer long-term credit. The purchase makes you a creditor, not a partner. The issuer of the bond, in turn, undertakes to repay the debt to you as the creditor of the monetary claim at the end of the term.

Description

Debt securities can have terms of up to 30 years or more. Depending on the terms and conditions of a bond, both the issuer and the creditor have the right to terminate the investment early. In this way, the issuer of a bond can obtain money without having to take out a loan from a bank or savings bank. The creditor receives an interest-bearing investment. If the issuers of bonds are government agencies, then they are called public bonds. Banks and savings banks issue so-called bank bonds or Pfandbriefe. Industrial companies offer industrial bonds to finance themselves. In recent years, many new forms of bonds have come onto the market: The combination options of several features such as maturity, repayment or interest yields a broad spectrum of differently designed bonds.

Possible goals: When could it make sense for me to invest in a bond?   

Fluctuations in the price of bonds are generally less than those of stocks, for example.

The issuers of bonds pay the obligee the interest specified in the terms and conditions on a specific date. At the end of the term, you will usually get the money back.

Debt securities from economically sound companies and states are considered to be a relatively safe investment for long periods of time. If they are traded on the stock market, you can sell them there at any moment. In addition, it is then also possible to achieve a higher return through price gains.

NOTE: Whether an investment in bonds makes sense for you depends on your individual investment goals as well as on your private investment strategy. Because here, too, the following applies: higher returns are only possible with higher risk. There are comparatively safe, but also very risky forms of debt security. The best protection, however, is to obtain comprehensive information and, if necessary, advice before making an investment decision !

What are the risks of investing in bonds?  

Price change risk: Price losses are also possible with bonds. Prices can fluctuate significantly depending on the type of bond. If you sell your bond before the end of the term, you have to accept the prices that are then current on the market. Liquidity risk: Some bonds, especially those of small and medium-sized companies, are not or barely liquid . So it can happen that they cannot be sold or not sold at short notice. In this case, you may have to wait until the bond matures to get your money back.

Interest rate risk: With a change in the general market interest rate, the price of a bond also changes. Falling interest rates mean that prices tend to rise. However, if the interest rate rises, the value of a bond can also fall.

Credit risk: The creditworthiness of an issuer can change during the term of a bond. It therefore plays a major role in the price development of a bond. For example, a company can get into financial difficulties or even become insolvent. The debtor may be temporarily or permanently unable to meet its interest and / or repayment obligations on time.

For the creditor of a bond, this means that he can not only lose some or all of his capital, but also that the agreed interest payments will fail. Also keep in mind that, unlike holders of common stock, the investor of a bond as a creditor has no voting or shareholder rights. So you cannot have a say in important company decisions.

Currency risk: You take a currency risk on bonds that are not issued in your currency. This means that exchange rate fluctuations can affect your profit or loss. There is no deposit guarantee for bonds . If the issuer goes bankrupt, you can lose your money.

NOTE: There are comparatively safe and very risky forms of debt security. Find out about the risks associated with debt security before deciding on any particular investment.

How can I benefit from investing in Notes?

The obligee receives the interest payments for the bond, which are specified in the conditions. At the end of the term of a bond, the issuer generally pays back the capital invested to the creditor in full. If the investor decides to sell a bond before the end of the term, this could result in sales profits or sales losses for him. Unlike shareholders, for example, the creditor of a bond is given priority over the owners of the company, but on an equal footing with other creditors if the company becomes insolvent.

What are my obligations and costs when I buy a bond?  

As a lender, you have to pay the selling price of the bond as well as the costs of the acquisition. There are, for example, agent fees and distribution charges in which vendors fund their sales expenses.

All costs in connection with the purchase and / or sale of your bond must always be made available to you in advance from your advisor/bank – regardless of whether you are using the bond without advice or with Acquire/ Sell advice.

Can I sell bonds at any time?           

Bearer bonds are freely and informally transferable. However, this is more difficult with registered bonds made out to a specific person. It is generally possible to sell listed bonds at current market prices on an exchange. Anyone who sells before the end of the term, however, has to accept the current price on the stock exchange – in a positive as well as a negative sense. A bank or savings bank can, for example, execute the sales order on behalf of the investor on the stock exchange. However, the sale of bonds that are not listed on a stock exchange can be difficult or even impossible.

Be careful when buying unknown stocks

Find out about companies before you buy their stocks! If you cannot find meaningful information about a stock (or any other financial instrument), extreme caution should be exercised.

In the past few years, many companies have been set up with the sole purpose of getting hold of investors’ money. It is not uncommon for these companies to have a website, but are located in other countries. After their inclusion in stock market trading, the shares are touted and recommended for purchase by stock market letters, spam e-mails, faxes and by persistent telephone sellers. When sales and price rise due to artificially generated demand, the market manipulators sell their blocks of shares. The investors bear the damage.

The open market requires informed and committed investors

The trading segments on the stock exchange are regulated to different degrees. In the open market, lower requirements apply than in the organized market. For example, there are only limited publication obligations there, such as the obligation to publish ad-hoc notifications, which only apply if the security has been included in the open market with the consent of the issuer.

Illiquid securities and investments have particular risks

The stock market price of illiquid, i.e. little traded shares, which are often only listed on the open market, can change rapidly and significantly. This also and especially applies to penny stocks (quoted in the cent range). Penny stocks often lead to herd behavior – for example due to a recommendation in a stock market letter: many investors buy the stock at the same time. As a result, their price soars quickly, only to fall into the abyss a short time later. Selling the shares again is difficult – regardless of the price. Many investors have already lost their money in this way.

Stock market letters: Beware of “hot air”!

Stock market letters reflect the opinion of their authors. How the author came to his assessment, he should prove with comprehensible facts. If there are no such facts and if the author only gives an unsubstantiated, but extremely positive opinion, the alarm bells should ring for you.

Anyone who makes recommendations is obliged to disclose their conflicts of interest. Even if these tips are small print and boring to read: take them seriously. Because if the author himself is trading in the stock or the recommendation was paid by a third party, you cannot expect an independent recommendation. If such a notice is missing, this can be punishable market manipulation.

You should be especially careful if the supposedly good advice is free of charge – or is even sent to you unsolicited. Selfless behavior is rare on the stock market. The senders usually have their own tangible financial interests. You then run the risk of losing your money.

Shares spam: e-mails immediately delete!

A large part of the unsolicited e-mails (spam) sent around the world advertise stocks. It doesn’t matter what is in these emails, their sole purpose is to trick you into buying so the senders can benefit from rising stock market prices. Spam faxes follow the same pattern. Only one thing can help: if you don’t even read the spam, destroy it immediately. Those who follow the recommendations have already lost. Worse still: By buying the advertised shares, you may even be liable to prosecution for attempted insider trading. Also, make sure that you have adequately protected your computer against such unsolicited email. The general rule is: don’t buy anything you don’t understand! This simple basic rule applies to private investors as well as to professionals. The following tips should help you not to fall for rip-offs. With them you also protect yourself against manipulation and fraud.

Banks and other financial intermediaries make a lot of money selling expensive financial products. Badly informed customers are left behind, for whom only meager returns are left after deducting all commissions and costs. Anyone who does not want to be satisfied with the crumbs that fall from the richly laid table of the financial industry can cut costs significantly – and thus increase the chances of winning.

When you take out an investment, it is not uncommon for you to be lousy. The reason is the costs associated with buying financial products. They are deducted from the purchase as a commission. It may take some time for your system to recoup these costs and for you to earn something – depending on the product in question and market developments. First of all, the bank collects before your investment earns you anything.

In some cases high commission

The closing commission is taken from you by the product providers and paid out to the banks (or other intermediaries) as a reward for selling the product. In the case of funds and certificates, the acquisition commission is known as the “issue surcharge” or “agio”. It is always calculated as a percentage. This means that the absolute amount of your costs also depends on the amount invested. If you invest 100,000 dollars  in a fund and the commission is 5 percent, around 5,000 dollars go to the bank or broker.

The percentage of the investment that is spent as a closing commission varies from product to product. Financial advisors make the biggest profits with so-called closed funds. In the case of investments in ships, it is often up to 15 percent of the investment amount. But banks do not only collect commission for funds and other securities, but also for the purchase of insurance or building society contracts.

Even more lucrative: portfolio commissions

However, banks are not satisfied with the acquisition fees. For most products, they also collect so-called inventory commissions. They are also called “sales follow-up commissions”. The product providers pay the portfolio commission to the bank every year as long as a product is in a customer’s depot.

Additional cost factors for funds

In addition to the management fee, fund providers often charge a performance fee, which the financial industry also calls a “performance fee” . It is due when the fund has exceeded a predetermined minimum performance or has performed better than a benchmark index. Then the fund company collects between 10 and 25 percent of the profit that exceeds the minimum or index return, sometimes more.

In addition, investors are often disadvantaged when calculating the success fee. The BaFin supervisory authority has now banned many unfair tricks . For example, it was often common practice to recalculate success every year – even if the fund had not reached its standard the year before.

In future, providers will have to extrapolate poor results over five years. This means that they are only allowed to collect a success commission when they have caught up with the backlog from previous years. Some companies charge performance commissions on a quarterly or monthly basis. Investors had to pay even though the fund had not achieved any success over the year.

Some providers calculated success without deducting the costs beforehand. The bottom line was that investors often had no additional income at all, but had to pay anyway. Companies now have to deduct other costs from the income statement. The companies can still collect a success fee if the fund was better than the benchmark index, but in the red.

Fundamentally, success commissions that have to be paid in addition to a fixed management fee are a tangible problem from an investor’s point of view. Because they set the wrong incentives. Fund managers are tempted to take higher risks. If your risky strategies work, you will earn high commissions. If they are wrong, they always get the fixed management fee, while the investor may be sitting on high losses. Investing more conservatively, which is in the interests of the investor, who generally wants to avoid losses, is not rewarded with this remuneration system. Things would look very different if fund managers were to receive only a contingency fee. In that case, their interests would be largely aligned with those of the investors. So before you buy a fund, find out whether the provider company collects a profit-sharing scheme. If this is the case, you can inquire for a thorough clarification of the terms and conditions of the remuneration. In principle, investors should better avoid funds that cash in on profit sharing. There are usually cheaper alternatives.

Insurers hide costs and commissions

Commissions are also paid when concluding insurance contracts. For private pension insurance, 4% of the gross amount owed is normal. As an exmaple, if a customer wants to pay in a total of 40,000 dollars in premiums by the start of retirement, the insurer picks up 1,600 dollars for the conclusion; some providers even more. The administrative costs come on top.

However, high acquisition and administrative costs reduce the future pension considerably. Customers can usually hardly see through this. Because insurance companies and intermediaries like to throw sand in their eyes. It is true that since 2008 insurers have been obliged to state the conclusion and administrative costs in dollars. However, they still present the costs in such a way that even the experts struggle to understand them. The whole thing is then completely opaque for the customer. Both intermediaries and insurers are also vehemently opposed to disclosing the agency commission.

Use Tax Breaks In The Corona Crisis: How To Proceed. The coronavirus causes horror and uncertainty around the world and for many people it leads to an existentially threatening situation. But what to do if the income drops and the current expenses remain unchanged? In addition to a government aid package worth billions, the tax authorities and legislators have also made it their business to provide relief in this difficult time. Here is an overview of which tax reliefs due to administrative instructions and due to the Corona tax aid laws entrepreneurs are waving and how they can get them.

1. Special advance payments in the Corona crisis: money-back promise

Anyone who can show a financial disability will receive a special advance payment in February from the Tax Office.

2. Have advance payments reduced in the event of a decline in profits due to Corona

In order to save every cent on expenses and to be able to use it for running costs or invest in new investments, an application should be made to the tax office to reduce the current advance payments for income and corporation tax to zero dollars. In this case, the tax office will also refund the advance payments made in the first quarter of 2020.

Important to know: You must also apply to the tax office to reduce the current trade tax prepayments. The tax office then sends a trade tax assessment notice for the purpose of advance payments to the municipality, which then reduces the current advance payments. So you only lose time if you apply for a reduction or refund of the trade tax prepayments directly from the municipality.

3. Flat rate loss carry-back to reduce advance payments in 2019

Now that the 2020 prepayments are reduced to zero dollars, you should start reducing the 2019 income tax prepayments or 2019 corporation tax prepayments. Because if you expect a loss in 2020 due to the Corona crisis, you can apply for a flat-rate loss carry-back without a 2020 tax return. In this case, the tax office reduces the assessment basis for determining the advance payments 2019 by a flat rate of 30% and thus reimburses part of the advance payments made in 2019.

4. Prevent subsequent advance payments with reference to Corona

If your tax advisor sent your 2018 income tax return or 2018 corporation tax return to the tax office at the end of February, the tax program may automatically set a fifth advance payment for 2019 in the case of back tax payments. In this case, too, you should apply for a reduction in this fifth advance payment with reference to Corona.

5. Corona victims and tax deferral

If you urgently need every penny to protect your company from bankruptcy, you should at least not encumber the tax payments that are already due or due. You can apply to the tax office to defer these taxes.

Entrepreneurs should note that the tax office does not waive the tax payments, but only postpones the due date. This means: the deferred taxes must be transferred to the tax office by 2021 at the latest. Whoever manages it should therefore start building up financial reserves at an early stage.

6. Prevent seizures with reference to being affected by Corona

A visit by an enforcement officer from the tax office can also be prevented by pointing out the Corona crisis. The later payment is preprogrammed. So if financial reserves can be built, that’s what business owners should do.

7. Application for government grants due to corona pandemic

Corona funding programs for low-interest loans or for investment grants . But how are such government payments treated for tax purposes? The following applies:

Subsidies for current expenses: Entrepreneurs who have suffered high losses in sales and profits due to the Corona crisis and therefore receive government subsidies, must tax these subsidies as business income, just like sales. However, sales tax does not have to be paid to the tax office because there is no exchange of services.

Investment grants: In the case of government grants for the realization of investments in business assets, entrepreneurs have a right to choose.

Alternative 1 : You can enter the subsidies as operating income in the normal way. Alternative 2 : You do not tax the subsidies as operating income, but in return you reduce the acquisition costs for the asset by the subsidies received and can therefore only deduct a lower depreciation from the profit.

8. Support for employees in the Corona crisis

If the corona crisis is bearable for the entrepreneur himself, but his employees have money worries because of the corona, employers can give these employees financial and wage tax favorable support.

9. Temporary VAT reduction

In the Second Corona Tax Aid Act, the VAT reduction was decided in the period from July 1, 2020 to December 31, 2020 . The standard tax rate for deliveries and services that are carried out during this period is only 16% instead of 19 % , and the reduced sales tax rate drops from 7% to just 5% in this time window .

10. Reduced tax rate for catering

The catering industry is being hit particularly hard by the consequences of the Corona crisis. In order to relieve the industry of tax, it was decided that generally only the reduced VAT rate has to be shown for meals in the catering trade, even if the customer consumes his food on site. The general reduced tax rate is to apply from July 1, 2020 until June 30, 2021.

11. Investment Deduction: More time to invest

If no investment is made by the end of 2020, the tax office will retroactively tilt the deduction in 2017, which will lead to back tax payments for 2017 and lavish back payment interest. But affected entrepreneurs who do not have the financial means to make the due investment in 2020 due to the Corona crisis can breathe a sigh of relief. In the Second Corona Tax Aid Act, the three-year investment period was extended by one year. In other words: it is sufficient, as an exception, if the investment is made in 2021 rather than in 2020.

12. Higher trade tax credit

The higher trade tax credit to which sole proprietorships or co-entrepreneurs of commercial partnerships are entitled is also particularly interesting. The tax office currently deducts up to 3.8 times the trade tax base on income tax. This is intended to reduce the trade tax burden or, at best, neutralize it.

13. Provisional loss carry-back

In section 4, we have already referred to the flat-rate loss carry-back to reduce advance payments in 2019. If you expect a loss in 2020, you can apply for a preliminary loss carry-back upon application. This amounts to 30% of the 2019 income (income without wages).

14. Further corona tips in brief

Short-time work allowance : When receiving short-time work allowance, point out to your employees that there is a risk of additional tax payments for 2020 and that they should therefore build up financial reserves. The short-time work allowance is tax-free, but increases the tax rate on the remaining income.

Tax returns : If you expect a refund for submitted tax returns, you must submit an application for priority processing . Because due to the corona pandemic, the clerks otherwise only process the applications for tax relief.

Declining balance depreciation: For investments in movable assets in 2020 and 2021, entrepreneurs can use a new depreciation method. We are talking about the declining balance depreciation. It is 2.5 times the straight-line depreciation rate, but no more than 25% of the acquisition costs or the residual book value.

Incidentally, the investment deduction is not a pure tax change. These advantageous new regulations take effect retrospectively. When determining the profit for 2020, you can therefore check whether a deduction for planned investments is (for the first time) possible.

Sales tax rates: tax changes 2021 with somersault backwards

On January 1st, 2021, entrepreneurs have to show the “old” sales tax rates in their invoices again. This means a standard tax rate in 2021 of 19 percent and a reduced tax rate of 7 percent. An extension of the VAT reduction, which was limited from July 1, 2020 to December 31, 2020, could not be implemented despite the ongoing Corona crisis.

Abolition of the solidarity surcharge for most

The 5.5 percent solidarity surcharge, which was originally introduced for the costs of reunification, will no longer apply to 90 percent of all taxpayers in 2021. But who still has to pay it? On the one hand, all corporations that are subject to corporation tax. All savers whose investment income is taxed with the final withholding tax and high earners with an income tax.

Tax changes in 2021 due to home office work

Employees who have to work a lot at home due to the Corona crisis but do not use a study but do work at the kitchen table or in a work corner in the living room can look forward to it. You benefit from the newly introduced home office flat rate. You can deduct 5 dollars per day, up to a maximum of 600 dollars per year. The tax office does not expect any proof of the costs. But one requirement has to be met: the home office flat rate is only available for days on which employees work exclusively in the home office.

Tax changes in 2021 also affect the tax-free corona premium

As an employer, you were able to surprise employees affected by the Corona crisis in 2020 with a tax-free Corona bonus of up to 1,500 dollars. Conditions including: The payment must be in addition to the wages owed and the payment must be made between March 1, 2020 and December 31, 2020.

Tax changes should also be observed in the event of Brexit

As a part of the EU-Great Britain deal in the Brexit conflict just before the end of the 2020 transitional phase, Brexit was controlled. Companies based in Germany with business relationships with Great Britain and Northern Ireland will have to observe numerous VAT tax changes in 2021 due to Brexit. From a sales tax point of view, these countries are basically third countries from 1.1.2021.

Sales tax advance notification: From 2021, the obligation to submit monthly VAT returns will no longer apply to founders. Whether the advance notifications have to be submitted monthly or quarterly or whether an annual sales tax return is sufficient depends on the sales tax payable in the previous year or on the expected payable in the year of establishment.

Conclusion: The tax changes in 2021 are numerous, but mostly beneficial for entrepreneurs due to the Corona crisis. The list in this practical article naturally only offers a small selection of the most interesting tax changes in 2021.

Stock market for beginners: how to become a capitalist

Do you have money but no idea about investing? No problem. It’s not that difficult to put together a solid portfolio of securities that delivers decent returns and is not too risky at the same time.

Don’t worry: you don’t need any previous knowledge. This is a beginner’s listing. You don’t have to be a number genius either. A dose of common sense and a touch of discipline is all it takes to become a good investor. Many have done this before you – and with our help you will too.

This is how stock market works for beginners

Some banks try to suggest that investors must constantly watch the markets and trade a lot in securities in order to be successful. This is – with all due respect – complete nonsense. Rather, it is like this: whoever trades a lot usually loses money, while the bank always wins. Because she earns from every securities deal that she mediates.

Successful investment is a quiet affair that takes little time. The portfolios that we propose to you hardly need any maintenance. It is enough if you take a look at it once a year and read just something if necessary. The often put forward protective claim that I have no time to invest is therefore not valid. Your greatest expenditure of time will be mastering this beginner stock market course, which is broken down into six steps.

Every beginner can go public in these six steps

Step 1 : Open a securities account. For beginners we recommend the direct bank deposit . -> Depot comparison

Step 2 : Think about how much risk you want and can take. A successful investment strategy only works if you can stick it out and don’t lose your nerve halfway through. -> Asset Allocation

Step 3 : Find out what diversification actually means. How to lower your risk and possibly even increase your return. -> diversification

Step 4 : Learn about selected asset classes like developed market stocks and emerging market bonds that you can use to build a robust portfolio of exchange-traded index funds (ETF). -> asset classes

Step 5 : Choose one of the suggested ETF portfolios or put together your own combination of different asset classes according to simple rules. -> ETF portfolio

Step 6 : Select the relevant ETF from our recommendation list and buy it. -> ETF recommendations

Now you are almost a stock market pro. You are at least as well informed as your investment advisor in the branch bank around the corner. You now reap the fat commissions that he would have taken from you.

If investing seems too strenuous and too complicated for you

Were you hoping that you could do the do-it-yourself investment quickly in two hours? Are you disappointed and frustrated at realizing that you need to invest more time? If so, we have more convenient (but also more expensive) alternatives for you:

Go to an independent fee advisor and have them put together an ETF portfolio. That costs money, but in the long run it is always cheaper than if you let a bank advisor push you into your custody account – supposedly free of charge – which are mostly of little use and may not even fit together sensibly.

You can also delegate the topic of financial investments to an asset manager. The classic administrators only serve customers with assets of 500,000 dollars or more. However, digital asset managers, so-called robo-advisors , are now offering their services on the Internet from entry sums of a few thousand dollars – mostly at affordable conditions. Once you have decided on a portfolio, you don’t have to worry about anything else. The digital administrator buys the corresponding securities and then manages the portfolio. However, you have to forego personal consultations in a dignified atmosphere with robo-advisors.

Avoid investment forums

And one more piece of good advice at the end of our long preface: Don’t get into the idea of ​​hanging around in any Facebook group on the subject of investing. The texts are nice and short there. But the half-truths and wisdom of the regulars that are spread there will not get you any further. They are more likely to add to your confusion and the risk that if you follow one of the many questionable pieces of advice you will be seriously wrong. Of course, everything that is posted in Facebook groups and other forums is not wrong. However, as a beginner in the stock market, you will find it difficult to distinguish the helpful from the harmful.

Basically: First, think about the goals you are pursuing with your securities investment and whether these are in line with your financial needs. What is the value of the security, profitability and liquidity of the investment to you? These considerations should always play a role in your decisions, especially if you want to invest in securities as part of asset protection and not speculate. Before making an investment, check your investment strategy critically and find out more about the contractual partner and the capital investment offered.

WHAT SHOULD YOU BE AWARE BEFORE OPENING A SECURITIES ACCOUNT?

Depot

Would you like to invest your money in securities – for example in stocks, bonds, certificates or investment fund shares? Then you have to open a custody account, for example at your house bank. If you want to invest in mutual funds without exception, then in many cases you also have the option of opening your custody account directly with the capital management company. You can also buy shares in the investment funds of other companies from individual management companies.

Selection

You don’t just rely on the recommendations of your advisor and prefer to choose your securities yourself? Then it is important that you clarify which securities you can buy in which markets before opening a portfolio. For example, ask your institute whether you can also buy units in investment funds on the stock exchange and what the fees are.

Costs

Note: Nobody is obliged to conduct securities transactions for you free of charge. This also applies to the safekeeping of your securities. You should therefore carefully read the cost information that you receive from your institute. It could be helpful to read the price list. Compare different offers, for example reputable consumer magazines that regularly publish price comparisons can help you.

Deposit transfer

Are you no longer satisfied with your bank? Then you can have your securities transferred to another bank. Note that such a deposit transfer takes a little longer than a money transfer. But ask if not all securities have been transferred after three to four weeks.

Depot protection

Are you wondering what your rights would be if your custodian bank went bankrupt? The securities that your bank holds in custody for you generally remain your property or in an equivalent legal position. If the custodian bank becomes insolvent, you have the right to segregation under the insolvency regulations. You are therefore entitled to the surrender of the securities. You must register this claim in writing with the insolvency administrator.

The same applies if you have invested your assets in investment funds and have the investment units held in custody by the capital management company. If the capital management company becomes insolvent, the investment units held for you in your fund custody account do not fall into the company’s insolvency estate, but must be returned to you.

What (information) obligations apply to securities transactions?

The obligations of companies in the securities business – for example with regard to questions of information – are not uniformly regulated. That is why it is crucial for you to know who you are dealing with.

Investment services company

If it is an investment services company – this includes banks, savings banks and financial services institutions – the following applies: Your partner must provide you a broad variety of details to make an educated investing decision. This includes, for example, information about the functionality and the risks of the various types of financial instruments, i.e. above all securities or investments (e.g. limited partnerships, profit participation rights), but also information about costs. You must be informed of all the costs incurred by your investment and their effects on the return. Donations that are paid by third parties must also be disclosed. The investment services enterprise must also break down the costs for you according to the individual items, if you request this.

Speak openly if you are inexperienced or do not understand something. Check the costs and sales commissions and consider what sales interest your counterpart has in doing business with you. This is especially important when you want to decide whether you want to take advantage of commission-based investment advice or independent fee-based investment advice.

In the case of commission-based investment advice, the investment advisor may only accept benefits from the provider or issuer for a recommended financial product if the benefit is designed to improve the quality of your service, it does not conflict with the proper provision of the service in your best interests and it is unambiguous to you is disclosed.

In contrast, with independent fee-based investment advice, only you as the customer pay the investment advisor. If, nonetheless, the advisor receives inductions from vendors and issuers, the advisor must pay you full charge. It is imperative that you provide detailed details on all compensation details to reduce hidden expenses and to figure out what is the most cost-efficient solution to your job. Investment Management firms can only propose to you shares that satisfy your investment targets and are designed to take the risks and appreciate them with your experience. Your financial adviser will ask you a couple of questions to determine which shares are appropriate for you:In good time before entering into a transaction, your investment advisor must provide you with a brief and easy-to-understand information sheet about the financial instruments he recommends for you to buy. When it comes to shares in investment funds, the investment services company must instead provide you with the key investor information. In the case of packaged investment products, such as certificates and structured bonds, you have to be provided with a basic information sheet; in the case of investments, for example limited partnerships and profit participation rights, an investment information sheet. All of these information sheets summarize the main features and risks of the product.

Investment services companies must also provide you with a declaration of suitability for any investment advice – whether in a branch, on the phone or at your home. This declaration must be made available to you either in paper form or electronically. This statement explains how the advice has been tailored to your preferences, investment objectives and other characteristics. This should give you an overview of the recommendations made. These must correspond to your investment purpose, your investment horizon, your risk tolerance, your financial circumstances and your knowledge and experience. In order to rule out discrepancies right from the start, you should read the suitability declaration carefully upon receipt. Think again carefully about the recommended investment.

WHERE CAN YOU FIND INFORMATION?

Public offering of securities or investments

For securities offered publicly or admitted to stock exchange trading (e.g. shares, bonds, certificates) and investments (e.g. limited partner participation, profit participation rights), companies must publish a prospectus and / or information sheet (securities information sheet, asset investment information sheet or key information sheet). This includes more detailed information on investments, the underlying business model and the associated risks.

The issuer of an investment must also send you the most recently published annual financial statements and management report on request, also in paper form if you wish. However, there are also exceptions to this obligation, for example if no more than 20 units of an investment are offered.

Investment assets

Are you considering buying a mutual fund share? Then the provider has to observe numerous information obligations towards you – before the purchase. Before concluding the contract, you must at least provide you with the latest key investor information for each fund managed, but sometimes also the sales prospectus and the most recently published annual or semi-annual report. In any case, ask for the most recently published annual or semi-annual report and for the sales prospectus with the investment conditions and, if applicable, the articles of association or partnership agreement. If a trust limited partner is involved, ask for the trust agreement. These documents must also be made available to you free of charge. Most of them can also be found on the company’s website.

The key investor information and the sales prospectus must contain all the information necessary to be able to properly assess the investment and the associated risks. The key investor information contains – in a summarized and simplified form – the most important information from the sales prospectus, especially with regard to the management company, the depositary, the investment objectives and investment policy, the risk and return profile and the costs and fees of the investment. The sales prospectus is more detailed than the key investor information and contains a range of additional information. It also contains the investment conditions and, if applicable, the articles of association or partnership agreement of the investment fund and – if a trust limited partner is involved – the trust agreement or a reference to where you can obtain it free of charge.

Plan Investments Properly. Each business needs to expand and be rentable. But when would you benefit from an investment? The answer to that gives you a tough investment calculation. This allows you to calculate the return on your purchase and get an overview of the expected revenues and costs.

Is the acquisition necessary and useful?

Whether the purchase is actually worthwhile for you depends on numerous factors and conditions. You should consider 2 fundamentally different cases:

  • Necessary (replacement) investments
  • Investments you make to grow your business.
  • Necessary replacement investments

Necessary replacement investments are when you need to buy capital goods that you absolutely need to keep business operations in their current form. Here are some examples:

  • You have to replace a car because of wear and tear, too old or due to an accident.
  • You exchange a computer so that you or your employees can continue to work.
  • You need office furniture for new employees.
  • You need to make these investments to keep the business going. You can then only choose the cheapest offer.

Investments to expand business

  • The situation is a little different if you can decide whether to make the investment or not. In such cases it is mostly an expansion investment. Here are some examples:
  • You buy new production machines to be able to manufacture and sell more products.
  • You want to open a new location in order to open up new markets.
  • Here you have to ask yourself whether you want to make such an output at all and whether it makes sense in principle. To do this, you should describe as specifically as possible which good you want to purchase for which reason and what advantages you expect from it in detail.

Is it really worth buying?

A detailed calculation and evaluation of your purchase takes place when you come to the conclusion that you basically want to make the investment. Depending on the importance of a project and the volume of an investment, different investment procedures come into play. In practice there are 2 basic methods:

  • Static procedure
  • Dynamic procedures

In the case of static methods, only simple comparative calculations are made, such as costs or profit. Only one fiscal year is considered, there is no calculation over several years.

Advantages of the static methods: They are relatively easy to calculate and it takes little time to compile all the necessary data.

Disadvantage: They are comparatively imprecise.

Static investment calculation methods are therefore mainly used for smaller investment projects or in cases where an investment is absolutely necessary and you only have to calculate the most favorable variant for your company, e.g. in the case described when it comes to the procurement of a replacement for a necessary vehicle .

With dynamic procedures , not only a fiscal year is considered. B. to sales, costs and profits, over a period of up to 10 years. From the annual profits (or losses) you can determine whether a project is really worthwhile for you to implement.

Advantage of the dynamic procedure: You can assess much better whether the project is worthwhile for you.

Disadvantage: This entails a considerably greater amount of work. Therefore, these methods are mostly only used for investments that are of great importance for a company or with a large investment volume. In order to determine the strengths and disadvantages of the market and of your goods or proposed offerings, it’s also a smart idea to carry out a comparative review of certain investments.

Financing the investment

Once you have decided to invest, you need to find out how you can obtain the necessary financial resources. You should pay for part of an investment with your own money if possible.

Rule of thumb: 20-30% would be desirable from the point of view of other possible investors, such as the bank. How high the percentage actually turns out, of course, also depends on the amount of money you want to invest.

The remaining capital required for the investment must be obtained from third parties. The first point of contact is usually your house bank. Ask specifically what information the bank needs from you. If you have a second bank account, you should also ask here in order to compare the conditions and choose the cheapest offer.

TIP: Some institutes do not indicate this inexpensive financing option on their own, so you must definitely find out about this yourself.

Use tax advantages

You should not make an investment dependent on whether it is worthwhile from a tax point of view; the overall result is more important. However, it can be worthwhile to keep a few things in mind: DEPRECIATION

Your investment will be written off over a period of time. To do this, the investment amount is divided by the number of years of use. You can use this value as a cost that reduces your profit. In the year of purchase, however, the entire (annual) amount can only be recognized if you make the investment in January. For every month that goes by, you may consider 1/12 of the amount less. As a small company, you can usually claim a special depreciation of 20% of the acquisition value as costs in the year of acquisition.

Investment deduction

If you only want to make your investment in 1 or 2 years, you have the option of claiming a so-called investment deduction amount of up to 40% of the planned investment in advance. To do this, however, you have to describe specifically to the tax office what type of investment you are planning. You can probably talk to your tax lawyer in advance so that you don’t make mistakes here.

Inflation-linked bonds are a bet on unexpected surges in inflation. Interest and repayment are linked to the rate of inflation.The real value of the money invested – the purchasing power – is preserved, no matter how much the prices rise, as long as the real returns are positive at the time of purchase. However, this is currently not the case. In contrast, traditional bonds with longer maturities offer no protection against unexpected inflation . Admittedly, their returns usually include compensation for inflation. But this is, so to speak, a collective estimate of bond buyers that emerges in the market. Ultimately, however, nobody knows how high inflation will be in a year or two.

HOW INTEREST IS PAID ON INFLATION-LINKED FEDERAL BONDS DEPENDS ON THE INFLATION RATE

In contrast, investors can in principle maintain their purchasing power with inflation-linked federal bonds. An example shows how inflation protection works:

An investor who invests 10,000 dollars does not get his 10,000 dollars back as usual after one year, but also an inflation compensation. At 5 percent inflation, he receives 10,500 dollars. Interest is also protected. 1 percent interest – that would be 100 dollars for the 10,000 dollars- becomes 105 dollars. To compensate for inflation, the coupon on indexed federal bonds is significantly lower than that of traditional federal securities. The federal government only pays the inflation adjustment when an indexed bond matures. The compensation payments are more or less accumulated over time. Together with the accrued interest, they are included in the so-called settlement price. This is the price a buyer has to pay the seller if an inflation-linked federal bond changes hands before it matures. The buyer extends the inflation adjustment to which the previous owner is entitled for the federal government. He gets the money back at the end of the term if the federal government pays the entire inflation adjustment.

FINANCE AGENCY SETS PRICES FOR INFLATION-LINKED FEDERAL BONDS ON A DAILY BASIS

Anyone who buys an inflation-indexed federal bond therefore knows for sure what real return they will achieve annually if they hold the paper to maturity. This is especially reassuring when investors are plagued by fears of inflation. With normal bonds, however, the real return is uncertain. It depends on how high the inflation will be in the future. If the inflation rate is above expectations, investors with indexed bonds do better. It is the other way around when inflation turns out to be lower than the market estimates. Incidentally, the expected inflation can easily be calculated by subtracting the real return on an inflation-linked federal bond from the nominal return on a normal federal bond with the same term.

INFLATION-LINKED FEDERAL BONDS ARE A NICHE PRODUCT

Inflation-linked federal bonds are still a niche product. In November 2018, only five with different maturities were traded. The real return on these securities was consistently negative, like that of all other federal securities- assuming inflation moves above a rate of 1.1 percent per year in the coming years. In the case of negative real returns, even inflation-indexed federal bonds do not offer any preservation of purchasing power- and asset growth is certainly not possible. You are a bet on a rising inflation rate, which has a calming effect on the nerves of some investors.

Help With Founding The First Steps. Wrong help is worse than no help. One of the entrepreneur’s first tasks is to choose his external helpers attentively when setting up a company. This article illustrates which collaborators will assist you with your entrepreneurship project and what manner.

The entrepreneur is an expert in his field, otherwise he would not dare to take the step into self-employment. But not every professional is also an expert in setting up a company and in running a company. Those who have sufficient economic knowledge can dare to do it alone. Everyone else needs professional help.

So test your business skills extremely carefully. You ought to at least have practical skills to succeed as an entrepreneur. However, you do not need to prove detailed knowledge of setting up a company and accounting. If you lack knowledge in these areas, however, you should resort to external help and plan the costs for it from the start.

Start-up assistance from start-up consultants

The wave of start-ups in recent years has resulted in a great demand for special help in the start-up phase. That is why quite a few management consultants have specialized in clients who want to become self-employed.

Start-up consultants are highly specialized in providing support in every phase of the start-up of a company, from the initial idea through to opening and beyond. Some even help with brainstorming. The following tasks are typical for start-up consultants:

  • Examination of the qualifications of the entrepreneur,
  • Examination of the business idea,
  • Analysis of the basic feasibility,
  • Preparation of the business plan,
  • Planning and implementation of start-up financing (including subsidies),
  • Advice on legal form / location,
  • Support in registering with authorities,
  • Drawing up the marketing plan,
  • Planning the opening.

When deciding whether you want to call in a start-up consultant, the only question that matters is: What are the advantages for me? The question of whether expert help is useful or even necessary can only be answered using the benefit analysis.

The tax advisor: help with and after the establishment

You will still use at least one advisor after the establishment: the tax advisor. The tax advisor specializes in tax issues. Many tax advisors have also included advising small companies on economic issues in their offerings. Many have also gained experience with business start-ups that can be used. Since advice on tax issues and also in economic matters will be necessary in the future, everything speaks in favor of using a tax advisor during the start-up phase.

The task of the tax advisor must be assigned to the phases of formation and normal business.

  • During the start-up phase , advice has the same content as that of a pure start-up advisor. The fact that the focus is on tax optimization shouldn’t really be a problem.
  • After the establishment (i.e. in the later, normal course of business), the tax advisor will support you in all tax matters, from monthly sales tax reports to wage tax payments to the company’s tax return.
  • In addition, the entrepreneur will ask economically complex questions after the establishment. The tax advisor can clarify this too.
  • As a service, the tax advisor can also take over the bookkeeping of the young company. If the scope is not yet very large and if the financial results are not needed immediately, the founder’s lack of knowledge of accounting issues can be compensated flexibly and inexpensively in this way.
  • This also applies to the execution of the payroll for any employees of the new company, which the tax advisor is happy to take over. In this way, the new company saves itself having to purchase an employee’s knowledge in the area of ​​payroll accounting.

Since the connection with the tax advisor should last as long as possible, the selection must be made with great care. Please note the following:

  • The tax advisor should have experience with companies in the same sector and of a similar size.
  • Private experiences that the entrepreneur has with the tax advisor play an important role: Is the chemistry right? Is the collaboration fruitful? Also check whether your tax advisor really has experience in advising companies. If he has previously dealt mainly with private customers, he usually lacks the routine to advise companies quickly and optimally.
  • They become less common over time, but they still exist: personal contacts between the tax advisor and the client. In order to reduce the effort as much as possible, tax advisors and companies should not be too far apart. The spatial proximity also ensures that the advisor can include developments at the location (in the community) in his advice. In addition, costs are an important parameter when choosing a tax advisor. That is why you make it clear from the start which services he can sell to your company in the future. The larger the order volume, the more likely your tax advisor will be willing to make price concessions when advising start-ups.

Tax consultants are required to bill their services according to the applicable fee table. In practice, however, it is customary to make individual price agreements with the tax advisor for different services (e.g. the tax statement including tax return, bookkeeping and / or payroll). The pure start-up advice is usually billed at daily rates that are lower than those of the start-up consultants. A lump sum payment (e.g. per month) can be agreed for later support in economic matters. However, the scope of the activities paid for with it should be described. Otherwise there is always potential for conflict in the future.

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