Defy The Stock Market Dip With Savings Plans. The current turbulence on the stock markets – triggered by the corona pandemic – is worrying many private investors. Those who invest long-term in funds or ETFs through savings plans can relax and wait for the roller coaster ride. The corona crisis has led to significant price fluctuations in the global financial markets. And some investors need good nerves when they are currently looking into their portfolio. But don’t panic: Anyone who regularly invests in investment funds or ETFs with savings plans, for example, and has a long investment horizon, is well-armed against such rollercoaster rides on the stock exchanges.
The Time Of Entry Is Secondary
Many retail investors worry about missing the ideal timing to invest in their stocks. It would be right for you if you don’t want to invest a large amount at once, but want to invest a certain amount in fund or ETF savings plans every month, you don’t have to worry about the right time to start. Because at the beginning there is little capital in the savings plan. For example, if you buy fund units for 100 dollars every month for ten or 15 years, more units will automatically be purchased when the price is low than when the price is high. This phenomenon is known as the cost-average effect. It also means: With a savings plan, you even benefit from stock market prices that have fallen in the meantime – provided that the prices have risen again at the end of the investment period – because you can buy a relatively large number of fund units for the same money.
In addition, the compound interest effect makes savings plan profitable if income and distributions are reinvested. Perseverance is, therefore, more important than timing when building long-term wealth.
Asset Accumulation: Be Patient
In the current phase of low-interest rates, there are hardly any real alternatives to equity funds, especially for younger savers. Your own risk appetite should always be taken into account; For example, in which the system height is larger or smaller. Because anyone who invests their money in the financial markets has to realize that things are not only going up on the stock markets but also going down in the meantime. The last few weeks have shown this impressively. With an investment horizon of 10, 15 or even 20 years, you can accumulate substantial capital even with small contributions. Savings plans bring a lot of constancy to wealth accumulation – and that pays off in the long term—another advantage: Fund saving is hugely flexible. You can top up, lower or pause the savings rates at any time, invest a more considerable sum in between or have short-term access to capital in the event of a financial bottleneck.
Plan Your Exit Well
When and at what price you sell the accumulated fund units at the end of your savings period, however, has a significant impact on the success of your investment. Ideally, you should therefore gradually move into secure investments in good time before the planned end of the term – if you need the money, for example, for a major purchase or retirement provision.