ETF

An ETF (exchange-traded fund) is a fund that is traded on the stock exchange and tracks a specific index. Instead of painstakingly picking individual shares, with a single ETF you invest in hundreds or even thousands of companies at once.

Most popular example: an ETF on the MSCI World contains more than 1,300 companies from 23 developed countries. This makes you globally diversified – if one company or region weakens, others make up for it.

Costs: ETFs are extremely cheap. The annual fees (TER) are often only 0.1–0.5% – ten times less than for actively managed funds.

Sample calculation: €200/month in an MSCI World ETF with a historical return of approx. 7%: after 20 years you have approx. €104,000 (with €48,000 paid in). Compound interest doubles the money you paid in.

How safe is the money in an ETF? ETF units are segregated assets (Sondervermögen): they are held separately from the assets of the fund company. If the company or your broker goes bust, the units still belong to you – unlike bank deposits, which are only legally protected up to €100,000 per bank. The price risk remains, of course.