Rick Lover


What should you look out for when buying an ETF. When choosing a stock ETF (index fund) there are a few things to keep in mind. In this article we explain important selection criteria.

The essentials in brief:

  • An ETF tracks an index. The more stocks the index contains, the better the risk diversification. So you can easily invest in over 3,000 stocks worldwide.
  • The lower the cost, the better. It doesn’t have to be more than around 0.5 percent per year, and in many cases only around 0.2 percent per year is required.
  • The fund shouldn’t be too small. If the assets under management in an ETF are over 500 million dollars, there is less risk that the fund company will close the fund at some point.

Compared to actively managed investment funds or certificates, ETFs have a simple structure and are very transparent. Nevertheless, it is advisable to think about a few key criteria before buying. These are the most important:

The index shown

An ETF only passively tracks an index instead of actively pursuing its own strategies. It is all the more important that investors make sure that they choose the right index for their investment objective when buying a product. Some indices contain only a few stocks or are calculated according to criteria that are difficult to understand. This is often the case with so-called strategy indices. These try, for example, to combine stocks with particularly high dividend payouts or particularly high-growth companies in one index. Private investors should basically concentrate on established indices from large providers that cover the largest possible part of the market and are systematically structured.

ETFs from various providers exist for all of the indices mentioned. Bond indices are generally less well known than equity indices. But the same applies here: Investors should look what is in an index. The remaining terms of the bonds included, the creditworthiness of the issuer and the currency in which the bonds are listed are important. Corresponding information can be found on the websites of investors or in financial information portals on the Internet.

The costs

Basically, almost all ETFs are cheap. Actively managed equity funds often charge an administration fee of 1.5 percent per year – or even more. For ETFs, on the other hand, the management fee is usually well below half a percentage point per year. Nevertheless, the same applies here: It is important to compare the products of several suppliers. For example, there are providers who expressly reserve the right to pay sales commissions to banks and other fund brokers in the fund prospectus. Such commissions can result in higher costs that investors ultimately have to bear.

Another factor: the more exotic the index that an ETF tracks, the higher the costs in the form of the management fee. This is other reason shows, why you should limit your investments to common indices as far as possible.

The type of income used

Equity ETFs regularly receive dividends from the companies whose stocks they hold. Bond ETFs receive interest payments from the issuers of the bonds they hold. Like other mutual funds, ETFs differ in what they do with that income. There are basically two options: distribute or reinvest. Distributing ETFs pass dividends and interest directly on to investors once a year. The money is then posted to the investor’s account. He then has to decide what to do with it. If you want to reinvest the distributed funds directly, costs can arise – for example through stock exchange fees. Reinvesting ETFs, on the other hand, reinvest the funds they have received in stocks or bonds. Interest and dividends are reflected in higher share prices. So the money stays in the fund and investors don’t have to worry about reinvesting it. However, they also have no current income.

Distributing and accumulating ETFs can also differ in their tax treatment. If you want to be sure about this, you should ask your tax advisor.

The fund volume

A simple rule applies to this criterion: a fund should not be too small. Because: The lower the assets managed in an ETF, the greater the risk that the fund company will eventually close the fund. While this is not a catastrophe, it can create additional costs for reinvesting funds. Larger providers have an advantage in this regard, because their funds often also manage more funds. And widespread indices are once again better than exotic ones. You should therefore always find out in advance how large the volume of the index fund is in which you want to invest. You should also note that the securities from widely used indices are traded significantly more than those from exotic indices.

Building the Fund

ETFs track indices in three main ways:

  1. Either they actually hold all stocks in an index directly – in the same proportion as they are represented in the index. This process is called full replication. It is usually not offered because full replication is expensive, especially for very large indices that also contain many smaller stocks.
  2. In most cases, the funds only contain a section of the stocks in the index, supplemented by a few derivatives. Then one speaks of an “optimized” replica. 

The third important process is synthetic replication. An ETF directly holds any securities that have nothing to do with the index and concludes a contract (swap agreement) with a bank at the same time. In it, it undertakes to compensate for the differences between the performance of the index and securities on the basket held by the fund.

Phishing online banking attracts crooks. Online crooks fish millions of times over account data: By sending spam e-mails, they steal secret access information in order to then clear away unauthorized cash.

Online crooks fish millions of times over account data: By sending spam e-mails, they steal secret access information in order to then clear away unauthorized cash. The electronic mail contains false links that do not lead unsuspecting users to the homepage of their bank or savings bank as intended, but to the almost perfectly replicated Internet pages of the fraudsters. There are similar problems with online retailers, online payment services, telephone providers or parcel services. With this password fishing (English: “Phishing”) the user is asked either to enter the account number and PIN, or asked to activate the account for security reasons by entering the code, or alternatively to open a file that contains a malicious program.

Whoever follows this request will really activate the account – for access by the fraudsters. The following tips will help online thieves avoid the phishing network:

  • Use modern software : Antivirus software is a must on every computer with Internet access. Modern internet browsers also offer protection against phishing attacks. It is important to always use the latest version of the software and to regularly update the antivirus program, the Internet browser and the operating system in the meantime. Many antivirus programs do this automatically. Last but not least, customers should find out what security precautions the financial institution takes in online banking to ward off fraudulent attacks.
  • Create a secure address: To be on the safe side, you should always enter the Internet address of your own bank yourself or create a link in your browser. Mistrust is called for when it comes to links or information on third-party websites and functions that create a link for the user. Under no circumstances may a link in an email be used. When using online banking, make sure that you use a secure https connection and never an unencrypted http page. Such an https page is usually displayed in the browser by an encryption symbol – for example in the form of a small lock. Attention:Criminals are also working more and more with https pages when attempting fraud. Therefore, an https alone is not a guarantee that the website belongs to the real provider.
  • Be suspicious: If the house bank does not send any other e-mails, the message in the e-mail inbox is most likely not genuine. Any links sent should not be clicked on under any circumstances. 

Links that contain long cryptic attachments in the browser window are particularly dangerous. The address of the fraudulent server is sometimes hidden in an extremely sophisticated way. Even advanced users can easily overlook this – especially since the wrong Internet address they are surfing looks very similar to the real pages of the bank. In addition, phishing emails usually contain a request for sensitive personal data such as a password or PIN. No matter how plausible the reason for this sounds: Credit institutions never email their customers to send secret data.

  • Act quickly : Anyone who has nevertheless become a victim of a phishing attack and entered a password, PIN or TAN on a fraudulent site should act quickly. If possible, the PIN must be changed immediately. In any case, your own bank should be informed immediately and online access and the account blocked. Then report it to the police – phishing is a criminal offense. The e-mail that led to the erroneous entry of confidential data should be made available to credit institutions and law enforcement agencies to assist them in their investigations. Under no circumstances may this be deleted afterwards, as it is important evidence.
  • Keep an eye on your account : It is generally advisable to check your account statements regularly. This way, incorrect or fraudulent debits can be detected early.

What does crowdfunding actually mean? And what is it about? What should you consider when it comes to digital crowdfunding.

The essentials in brief:

  • A large number of donors finance a project with small amounts of money under the term crowdfunding.
  • Crowdfunding participation is comparable to a donation. In return, donors usually receive material goods or certain project-related privileges.
  • Crowdinvesting, on the other hand, means financing in which the investor is promised interest or a profit-sharing.
  • Before participating in crowdfunding, find out what will happen to your money if the crowdfunding project fails or does not materialize.

Crowdfunding is a new form which is relatively, the financing specific projects and ideas. Using special crowdfunding platforms, projects such as a film, a book or a software idea are presented and supporters, in particular donors, are sought. The basic idea: a large number of small financiers (the “swarm”) jointly implement a project.


In the early days of crowdfunding, projects in the areas of social affairs, art, music, film and literature were mainly financed. The instrument of crowdfunding is still used today primarily by actors who cannot or may not want to acquire the necessary funds in the conventional way, for example through loans. 

Through crowdfunding, for example, fans of an author or a musician can participate financially in his next book or record and thus support his work or in many cases make it possible in the first place. This is how world travelers can pay for their circumnavigation of the world, about which they then write a book. 


Participating in crowdfunding is comparable to making a donation. In return, as a supporter, you will not receive any interest or dividends , but material goods or certain privileges . For example, you will receive a signed version of the book or exclusive insights into the new film before it is published.

A special mention – for example in the credits of the film – is also conceivable. In turn, supporters of a band can hope to gain access to the artists’ backstage area. 

In some cases, donors also receive a donation receipt  and can thus take advantage of tax benefits. Often the consideration given is also graded according to the amount of the donation. Those who give more money receive more exclusive consideration.


Because the financial participation in crowdfunding qualifies as a donation, this type of participation is not a classic financial investment – in comparison to crowdinvesting. Crowdinvesting, too, is known as crowd financing and is offered via internet platforms. The transitions from crowdfunding to crowdinvesting are fluid.


  • Before making a donation, find out via crowdfunding what will happen to your money if the project fails. Do you get your money back?
  • Check out what happens when a crowdfunding project fails. Because that is particularly possible with new and young companies and projects. You can usually find information on this in the terms and conditions of the crowdfunding platforms.
  • Be aware that when you participate in crowdfunding, you usually have no say in or influence decisions.

Make sure you get a donation receipt for your money. This is the only way you can take advantage of tax advantages through crowdfunding

Advisory Protocols, Better Protection for Investors. No more sales pitches without a consultation protocol: banks and savings banks are obliged to document all investment advice given to private customers. The consumer advice centre explains what customers should pay attention to.


The law is intended to better protect private customers from wrong investment advice. Investment advisors now have to document every consultation on securities with a log and give their clients the record before a deal is concluded. This should enable investors to check whether the consultation was reproduced correctly.

The protocol is also intended to support customers in a dispute between investors and financial institutions due to incorrect advice. They should be able to refer to it in court. So it is conceivable that a log shows that a customer has requested a risk-free form of investment. If the institution has nevertheless recommended a risky security investment, it must prove that it advised correctly despite this obvious contradiction.

In addition, the statute of limitations for claims for damages due to incorrect advice has been adjusted: Investors now have up to ten years to claim damages in court for incorrect advice. But be careful: This period is shortened if the investor realizes (or has to realize) that he was advised incorrectly. Before the new regulation, the period was only three years.

ATTENTION! When it comes to the question of when a claim for damages due to incorrect advice expires, there are many special features to consider. It makes a difference whether the consultant acted deliberately or just negligently. The investor’s knowledge of advisory errors and the timing of the advisory change also change the calculation. If in doubt, have a lawyer examine possible claims for damages and their statute of limitations.

For consultations that do not involve securities, no consultation protocol is required. Advice on, for example, overnight money accounts or entrepreneurial investments is therefore not affected by the protocol requirement.


How the consultation protocols look in detail is left to the banks themselves – the legislature only makes general requirements. The protocol must then contain:

  1. the reason for the consultation,
  2. the duration of the conversation,
  3. the information relevant to the consultation about the personal situation of the customer,
  4. Information about the financial instruments and investment services that are being discussed,
  5. the wishes and investment goals of the client and their weighting and
  6. the product recommendations of the consultant and their justification.

The consultant must sign the protocol and give a copy to the client – before closing a deal. If this is not possible – for example, when providing investment advice over the phone – the advisor must send the client the minutes immediately.
In this case, he must also note in the minutes that the customer has expressly requested a transaction before receiving the minutes. And: The bank must grant the customer a one-week right of withdrawal in the event that the protocol is incorrect or incomplete. This must also be noted in the protocol. The customer does not have to sign the protocol himself.


The protocol is intended to protect customers. However, this protection can only work if you carefully check the log before purchasing an investment product:

  • Pay attention to completeness: The minutes must contain information about the occasion, the course and the duration of the consultation. The personal situation of the customer, his wishes and investment goals must also be documented. The products recommended by the advisor and the reasons for his recommendations must also be listed. The consultant has to sign the protocol and give a copy to the client.
  • Read the minutes carefully: Read the documents your bank advisor gave you. And insist on changes if you notice discrepancies or if the content of the minutes does not match the course of the conversation. Is your personal situation presented differently from the way you described it? Do the logged investment goals not match your specifications? Can’t you understand the reason for recommending a product? Then point this out to your advisor.
  • Do not sign the protocol: You should also know that the law does not require you as a consumer to sign the protocol. Only the signature of the consultant is mandatory. If your bank insists on a signature anyway, this is not intended to protect the investor – but to secure the bank. In the event of a dispute over incorrect advice, the bank will want to interpret your signature as if you had accepted the content of the minutes.
  • Use right of withdrawal: Remember that you have a right of withdrawal if you have concluded an investment transaction by telephone and do not receive the minutes before the transaction is completed. In this case, you can still resign from the deal for a week after receiving the minutes. This right of withdrawal only applies if the protocol is incorrect or incomplete – it is not an unrestricted right of withdrawal as is the case with other distance selling transactions. Nevertheless, if you get into a dispute with your bank because you are withdrawing from a transaction, the bank has to prove that the record was correct – not you as a customer.
  • Please do not rely on the minutes alone: ​​Especially when it comes to important consultations, you should not rely on the minutes alone. Take a witness with you to the bank who can confirm your view of things afterwards in the event of a dispute. Make sure, however, that your witness does not become a contractual partner with you. If you bring your spouse as a witness, then they should not close the deal with you. In this case, he can no longer be a witness.

What to do if the account gets more expensive. If the bank or savings bank turns the cost screw, you can look for cheaper providers. An objection is also possible – but then the bank may terminate you.

The essentials in brief:

  • If your account gets more expensive, you can either accept, cancel, or object to the new fees.
  • If you do not react by the deadline, this usually means approval. Then you have to pay the new fees.
  • You can often save money by looking for cheaper account models or other providers. With direct banks, in particular, you have a good chance of getting a cheap or free account.

Suddenly the bank wants to have money for the account: After many years with free checking accounts, many financial institutions are rowing back and are rediscovering account fees and charges. Some banks and savings banks increase existing fees by a few euros a month or introduce new ones. This step is justified by the low-interest rates that have been prevalent for years. Many savings banks and other private customer banks claim that they are currently facing the same problem: They can hardly earn any more money with other business areas.

Not Reacting Is Considered Consent

If fees are introduced for previously free accounts or the old fees are increased, the bank must notify you of this – at least two months in advance. The law stipulates that this must be done in writing. Attention: It may even be enough if the note is on the account statement. If you have agreed on an electronic communication channel (e.g. for online banking), the changes can also be communicated by e-mail, for example. However, there is always incorrect information from the banks and savings banks (the market watchdog team at the consumer centre in Saxony, for example, has successfully issued a warning to a savings bank – there was no reference to the free right of termination). If in doubt, have the letter checked legally by the consumer advice centre. Illegal information does not lead to a pay increase! However, the bank can, of course, correct its mistake and send a (then correct) price increase letter for the future.

ATTENTION: If you do not object to the price change by the deadline, this will be considered as approval (so-called approval effect). The new fees will then take effect, and you will have to pay them. In its letter, the bank must indicate the impact of the approval and your right to end the contract free of charge and without notice.

What To Do If The Fee Changes

You can accept the price change. In this case, you don’t need to do anything else. However, it may be worthwhile to switch to a different account model with the same bank. Pure online accounts are cheaper with many providers than traditional checking accounts, which offer full service in the branches. Anyone who can imagine doing their financial transactions over the Internet can save money here. In some cases, price adjustments only affect customers with certain usage behaviour. Anyone who uses an online account, for example, is not affected by a price increase for sending bank statements.

If you disagree with the price increase, you can cancel and switch providers. With direct banks, in particular, you still have a good chance of getting a cheap or free account. You can also object to the adjustment of the fees. The account will then be continued under the previous conditions. Warning: if you object, the bank may terminate your account. Then you would have to look for a new provider. Since the bank has to observe a notice period of at least two months, there is enough time to look for a new account.

Demand Goodwill

Our experience shows that some banks are quite accommodating to certain customer groups (e.g. senior citizens). At least if the customers insist on it. In the past, Postbank, for example – at least for older customers – waived fees for transfers by paper order.

IMPORTANT: As a rule, however, customers have to take action themselves and demand goodwill.

Particular case of advertising promises or special contractual clauses

For example, if banks have advertised their account as “free of charge for life”, the customers acquired do not have to accept a new fee or a price increase. This is all the more true if the contract itself contains such a passage. However, experience shows that these customers have to take action themselves and remind the bank of their promise. The exact wording of the advertising should also be decisive. With a “lifetime free” account, the case is clear. If the language is not so precise, it takes a little more effort to justify a complaint. But it can lead to the institute giving in.

Banks Have To Help With A Change

Incidentally, both the old and the new bank are legally obliged to help you switch (for example, change direct debits and standing orders). Of course, you can also make the change yourself. You can find tips, sample letters and checklists for this in our article. It is still worth to keep an eye on the conditions with other account models and other providers. However, switching is no guarantee of lower fees in the long term. It is to be feared that other (branch) banks will follow suit in terms of fees shortly, as the cost pressure is high for the institutes. It is, therefore, essential that you determine your real needs. You should not be misled by the increasingly offered value-added services, such as various dealer discounts or additional insurance services.

Consultants and brokers are usually reluctant to talk about the costs of financial products; they prefer to refer to the small print in the so-called product information sheets . Or they play it down by claiming that good products have their price.

Do not be fobbed off with it, because the costs are of paramount importance for your investment success.

How can you tell what your investment is costing? The following overview shows the most important products and some types of costs (the list does not claim to be complete, we have only shown the most important):


  • One-time costs : acquisition and distribution costs
  • Annual costs: administrative costs
  • Where to look Annual status announcement, product information sheet, in an emergency: ask in writing


  • One-time costs : front-end load, e.g. T. also redemption fee
  • Annual costs: TER (Total Expense Ratio), performance-related remuneration
  • Where to look Key investor information


  • One-time costs : Usually none
  • Annual costs:  asset management fee, in addition to or offset against running costs of the investment fund
  • Where to look Asset management contract


  • One-time costs : acquisition fee
  • Annual costs:  partly account management fee
  • Where to look Bauspar terms of the respective Bauspar tariff

Why is the cost so important? On the one hand, they definitely accrue, but possibly promised income not.

This illustrates an extreme example :

Suppose you invest 100 dollars per month in a unit-linked pension insurance . Before the money is invested, the insurance company deducts 7 dollars in administration costs and an additional 4 dollars in acquisition costs . Of the 100 dollars, only 89 dollars are invested on average. In fact, there is much less left at the beginning of the contract because the insurance companies do not distribute the acquisition costs evenly over the entire term, but deduct them in bulk over the first 5 years.

In order not to make it too complicated, let’s assume 89 dollars that are invested. In an investment fund , more precisely in a fund of funds. This does not cost anything extra, but an annual administrative fee of one percentage point of the managed money is due. So that the 89 dollars are still there after one year, a return of one percent must first be achieved to offset the management costs for the fund of funds.

But it wasn’t that yet. The fund of funds is called a fund of funds because it invests the money in other investment funds. So another 1 or 2 percentage points are due annually. So that the 89 dollars do not melt away like snow in the sun, the fund managers have to generate income of 2 to 3 percent annually before all the costs. Will that work? Unlikely, based on what scientists have found in their studies of mutual funds.

Information sheets are intended to facilitate orientation in the financial jungle on how to understand and compare financial products.

The essentials in brief:

  • Providers of financial products are legally obliged to provide a brief and precise description of their investments.
  • This information sheet summarizes the most important features of a financial product and helps you to compare different offers.
  • Despite this legal obligation, an investigation by the market watchdog shows a lack of transparency in the information on investments.

What is a product information sheet?

Regardless of whether it is for financial investments such as overnight money or investment funds, insurance or telecommunications contracts: legally required product information sheets aim to ensure that you record the essential characteristics of a financial product. This transparency should allow you to understand different products and compare them with one another. Colloquially, a product information sheet is therefore also referred to as a “package insert for financial products”. Because it should provide quick and precise information about “risks and side effects”.

For example, a product information sheet provides information on:

  1. Type of financial instrument (e.g. a fund)
  2. Functionality
  3. Associated Risks
  4. Prospects for capital repayment and income under various market conditions
  5. Costs associated with the investment

An information sheet can have different names

Information sheets have different names depending on the investment or insurance product. You will therefore not always find the document under the name “Product information sheet”.

More transparency: the future basic information sheet

New regulation of the supervisory law for financial investments should ensure even more transparency for all financial products in the future. The basic information sheet should be concise and informative. The document may contain a maximum of 3 A4 pages and must provide clear and understandable information about the costs and the effect these costs have on earnings.

Additional help with the investment decision

Information sheets are an additional source of information for financial products. However, do not base your investment decision solely on this document. Instead, do extensive research.

The following can help you with the investment decision:

  1. Read the product information carefully and compare alternative offers.
  2. Obtain multiple opinions.
  3. Don’t push yourself to be put under time pressure to make the right decision.
  4. It is best to take a witness with you to the consultation.
  5. Read the counselling protocol carefully and immediately complain in writing about anything that is not applicable.
  6. If necessary, have the offer checked by an independent body – for example, by the advisors from the local consumer centre.

Basic Information Sheets Recognize The Risks and Costs Of An Investment. How risky is an investment? What performance does it promise? What is the EU regulation?

The essentials in brief:

  • The aim of the EU regulation on the basic information sheets is that you can better compare different investments with each other and make better decisions.
  • The market watchdogs looked at information sheets from various providers. The result: the information can be misleading. So they don’t always help with a decision.
  • We show where traps lurk.

As a small investor, you are faced with a complex range of different investment products. But where is the money safe and secure, where are high returns possible? A look at the information sheets of the providers should help. The aim of the regulation is to better inform private investors about the risks and cost structures of the different products and thus to increase comparability.

Packaged investment products: when does the information obligation apply?

So-called “packaged investment products” for small investors are affected by EU regulation. These are investment and insurance products for which your repayment claim may be subject to fluctuations, i.e. the value of other assets is subject to changes. These include, for example:

  • structured financial products such as certificates or warrants
  • other insurance investment products such as unit-linked and index-linked life insurance
  • from 2020 also public funds

Uniform key information sheets: what must be in them?

To ensure that key information sheets are as uniform as possible, the PRIIPs Regulation contains binding provisions on form and content.

Formal requirements:

  • The key element information document must be given to you before you sign the contract .
  • If you wish, you have the right to receive a printed version .
  • The document must be entitled “Key information sheet” on the top of the first page .
  • For a better overview, a key information sheet may contain a maximum of three A4 pages .
  • All information must be precisely formulated and prepared in an understandable manner.
  • The key information document must follow a question style (for example: ” What kind of product is it?”).
  • The provider must publish the documents on his website and keep them up to date .
  • If a provider does not adhere to these information requirements, you should be careful. You can then also inform the responsible supervisory authority Bafin or the consumer advice centre.

Content requirements:

  • Information about the product type and the essential characteristics
  • Objectives of the product
  • Information on the opportunities and risks of the product
  • Pay particular attention here! Because with investments with high possible returns you can often just as quickly lose money. If you want to invest in risky investment products, you should be able to afford defaults.
  • Cost: direct and indirect costs, including one-time and recurring costs
  • Investment horizon: information on the investment period for which you have to spare money.
  • Your options to complain

Suitable performance scenarios: for example the estimated annual average return for different maturities. Caution: As a market watchdog study shows, this is not always a realistic aid. If the investment has performed unusually well over the past few years, the example calculations can look impressive. But that doesn’t mean that things have to continue to run as well in the next few years. Strong fluctuations are possible with some investments.

Situation in the event of a bankruptcy of the provider. Various companies issue profit participation rights, bonds, subordinated loans or similar forms of investment in order to raise capital. Consumers can invest their money by purchasing these financial products. Occasionally these companies get into financial difficulties and have to file for bankruptcy. In the following, we explain what the general situation is for investors in the event of bankruptcy.

Basics of bankruptcy proceedings

In insolvency proceedings – to put it simply – the company’s existing assets (warehouses, machines, own claims, goods, etc.) are used to pay the claims of the creditors (employees, investors, banks). Usually, this is done under the direction of an insolvency administrator.

Often the assets are not sufficient to meet all demands. Therefore, creditors must expect losses.

The course of an insolvency procedure

Business media often first report economic problems and possible bankruptcy. If bankruptcy can no longer be averted, an application is made to the court to open insolvency proceedings. Reasons for this step can be insolvency, impending insolvency or over-indebtedness. This begins the so-called “preliminary insolvency proceedings”. During this stage, the proceedings, the bankruptcy court is obliged to take precautions to secure the debtor’s assets. This is done, for example, by appointing a preliminary insolvency administrator.

This is followed by the actual insolvency proceedings, which begin with the so-called “opening resolution”. There are now various options in the process. On the one hand, it can end in the company’s liquidation. In this case – to put it simply – the company’s existing assets are used to pay the claims of the creditors.

On the other hand, an attempt can be made to continue the company as a whole or at least parts of it. This can be done, for example, through an insolvency plan. Put; this is a contract between all creditors in which they agree on the terms under which the company can continue to operate. In particular, it will decide on the (partial) waiver of claims.

To ensure a fair distribution of the remaining money for everyone, the outstanding claims of all creditors against the company are collected and recorded in the insolvency procedure. This collecting and recording of the claims is legally called the “registration for the insolvency table”.

If that happens, investors have to take action and register their claims. The insolvency administrator usually sends the required documents and information on the next steps by post. During the preliminary insolvency proceedings, the registration of claims is not yet necessary and would have no meaning.

The creditors’ meetings

In the course of the proceedings, the insolvency administrator sets a date for a first creditors’ meeting. On the, he usually provides information about the company’s economic situation. In addition, decisions on the progress of the procedure are made there. These include, for example, the commissioning to draw up an insolvency plan and the election of the members of the creditors’ committee. Investors have voting rights and can thus help determine the future development of the company.

In further creditors’ meetings, for example, the insolvency plan (drawn up by the insolvency administrator) can be voted on. Participation in the meetings is not mandatory. Investors who do not want to participate do not have to be represented by another person. However, important decisions about the future of the company can be made at the creditors’ meeting. Absent investors can also be bound by it.

Investors who are unable to attend the meetings for technical or time reasons can be represented. It should be noted, however, that the authorized person is authorized to appear and vote on behalf of the investor. The declarations made by the representative are binding for the investor.

Only grant power of attorney if you trust the authorized person. Powers of attorney already granted can be revoked. The authorized representative may then no longer act as your representative in the future.

Investor losses

It is difficult to predict what losses investors will expect in the event of bankruptcy. The insolvency administrator often comments on this after having obtained an initial overview of assets and debts. But this is also only an estimate. Possible subordination: Roughly speaking, the total assets of the debtor are collected in an insolvency procedure and distributed among all creditors. However, not all creditors are always treated equally. In some investment conditions, there is a so-called subordination. This means that only when other creditors, who are to be treated with priority, have received their money in full, the creditors in the lower ranking receive their money. Suppose there is still something left. How high this remainder is or whether the subordinate investors get nothing at all cannot be said with certainty.

Duration of bankruptcy proceedings

Insolvency proceedings can take several years. As a rule, investors are informed about new findings by the insolvency administrator and, for example, invited to creditors’ meetings.

Sale of the investment

Often profit participation rights, bonds, subordinated loans or similar forms of investment can be sold to third parties. Some of them are even traded on the stock exchange; however, stock exchange trading can be suspended in the event of bankruptcy.

Whether a sale or a transfer to third parties is permitted at all is regulated by the investment conditions that the consumer generally received when purchasing.

If the sale is possible, investors face a major problem: They have to find someone who – despite the (impending) bankruptcy – actually buys the investment from them at an acceptable price.

Foreclosure against the company concerned

In general, if creditors want to enforce a claim (e.g. for damages) in court, they can first sue. With a judgment based on a lawsuit, the creditor can then pursue foreclosure. This means that he can force the debtor with the help of the bailiff to pay the sued monies. It is also conceivable to apply for a dunning notice. For the time being, a court will not issue any judgments required for enforcement. Even if investors already have a judgment in their hands, individual foreclosure measures by judgment (or payment order) are no longer permitted after the opening of insolvency proceedings.

Even in the preliminary proceedings, the insolvency court can prohibit or stop individual enforcement measures.

Legal action against third parties

Since creditors often only receive minimal amounts in insolvency proceedings, alternative counterparties are often sought. This can be, for example, the company’s managing director who filed for bankruptcy too late and thus made himself liable for damages.

If the investment was made based on incorrect advice – for example, from a bank or financial service provider – this can also result in claims for damages.

Investors should always keep in mind: A lawsuit is still fraught with certain risks! If you lose the process, you have to pay the court and legal fees yourself. Also, all other investors have the option of filing a lawsuit. For some defendants (for example the managing director mentioned) a large number of cases could bring them to their knees very quickly, which in turn makes it less likely that all plaintiffs will be successful. Acting quickly can be beneficial, but there is no guarantee that you will get your money.

NOTE THAT! Investors should, therefore seek advice from a lawyer before filing a lawsuit.

Beware of exuberant promises

Investors should exercise particular caution when lawyers promise them sure success in court or in pending insolvency proceedings, for example on the Internet or in any other way. Investors can obtain information from the local bar association about lawyers who are particularly qualified in the field of investment.

Further consumer rights in case of company bankruptcies

Consumers cannot be affected by bankruptcy just as investors. Likewise, for example, the seller or manufacturer of a purchased product can file for bankruptcy. In this case, numerous questions arise over and over again – for example about prepayments, defective products, hire purchase, data protection and vouchers that have not yet been redeemed. Our information on consumer rights in the event of corporate bankruptcies provides the answers.

Are sustainable investments always unsafe?

The bankruptcies of companies whose business fields include the energy transition or renewable energies have recently received special attention in the media. Participations in such companies are a form of climate-friendly or sustainable investments. Certain ethical, social and ecological criteria are taken into account for sustainable investments. For example, the manager of an equity fund is instructed not to buy shares in companies in the nuclear industry. With the exclusively climate-friendly investments, the focus is accordingly on protecting the climate. From climate savings certificates to sustainable investment funds to closed investments in wind farms, there is everything in the area of ​​this investment that also exists in the area of ​​classic financial investments.

With sustainable and climate-friendly investments, the palette ranges from “very safe” to “high risk”. Such investments are therefore not always unsafe or risky.

Those who invest wisely in the stock markets can hope for significantly higher returns. Those who invest wisely in the stock markets can hope for significantly higher returns.

The essentials in brief:

  • In times of low-interest rates, stocks can be a high-dividend alternative for your investment. However, stocks are subject to strong short-term fluctuations and therefore, also harbour a higher risk of loss.
  • The following applies to stocks and investments: Don’t put all your eggs in one basket. So don’t bet on one or a few stocks, but spread your stock portfolio widely.
  • We explain which investment strategy there is with one or more equity products and what is worthwhile for you when.

To be able to build up assets in the long term despite the current low-interest rates, many investors rely on stocks. A typical mistake when investing money in stocks, however, is a lack of diversification in the stock portfolio. On the other hand, if you invest wisely in stock markets, you can hope for significantly higher returns. We explain why broad equity diversification is worthwhile for you and what potential index funds have for your investments.

Shares: Rapid Losses And Price Increases

The history of the stock markets shows: the bottom line is that the long-term average returns are around four per cent higher annually than with safe investments. These include, among other things, a savings or call money account. If you want to invest in stocks, you should be aware that intermittent losses of up to 50 per cent are just as average as rapid price increases.

Spreading Risk Is The Best And Only Remedy Against Excessive Losses

The same applies to stocks as to investments: never put everything on one card! Unfortunately, so-called financial advisors still violate this rule far too often by selling their customers products that are too risky! The advantage of risk diversification: sometimes the stock markets are doing well, sometimes there is a lean period on the stock market for ten or 20 years. Then it is good to have substantial interest income from safe investments. If you want to buy stocks, you should therefore not rely on individual stocks and invest in one or a few stocks, but rather diversify your stock portfolio. That lowers your risk of losses.

Index Funds: Broadly Diversified In Equity Markets

One way of spreading risk is the so-called investment funds, especially index funds, because this contains a large number of different individual stocks (interest-bearing paper, shares, real estate).

Index funds (also called  ETFs, Exchange Traded Funds ) map the development of stock markets worldwide. They are a rock-solid investment and are also well suited for retirement provision. Note, however, that ups and downs are unavoidable even with ETFs.

Risk Diversification In Stocks: Tips For Buying Index Funds

The cheapest way to buy index funds is through a direct bank. Index funds are not actively offered in the branches of banks and savings banks and by financial distributors because there is no adequate commission for the broker. If the independent search is too complicated for you and you need advice, speak openly with your intermediary about your concerns. There are also other globally diversified funds in the range of the consultants, which are more expensive but are often sold for a commission. In this case, at least negotiate the front-end load to reduce costs.

The independent financial experts at the consumer advice centres will also help you find the right investment for you.

DUBIOUS STOCK OFFERS: Warning against calling dubious stock traders

Beware, dubious stock traders have been looking for customers for a long time! The market watchman experts at the consumer advice centre Hessen warn of unwanted advertising calls from alleged stock traders. Shares from well-known companies – including Lufthansa, Siemens, Tesla and Amazon – are offered to consumers for purchase by telephone.

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