For the period 1970 to 2015, the MSCI World achieved an average return/year of 9.2 per cent. The MSCI World contains shares of 1,600 companies domiciled in 23 industrialised countries. Over the last ten years, it has achieved a return/year of 6.82 per cent.
There are not only supporters
Of course, there are also critical voices. Particularly because ETFs are becoming more and more popular. This is because more and more investors are deciding against actively managed equity funds and prefer to pump their money into the low-cost ETF variant.
Anyone looking for an ETF should by no means be put off by the following criticisms – some of which can be (very easily) refuted:
Too little money is held – during a downward phase it is not possible to get rid of one’s shares. Check out www.indexuniverse.eu and see all the ETFs or check Social Media:
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Of course, there are fewer cash reserves in an ETF than in an actively managed fund. However, the fact that it is actually not possible for the special ETF traders (market makers) on behalf of the ETF fund companies not to buy the ETF shares from the investors is extremely unlikely.
In theory, this would only be possible if one invested in an illiquid niche market where hardly any trading takes place. If one bets on large stock indices, this criticism is worthless.
The fact that US dollars are often used is particularly risky.
What is an ETF – CriticsThe MSCI World, one of the best-known indices, is denominated in US dollars. This means that there is a so-called currency risk against the euro. A euro investor may therefore not be able to profit 100 percent from the positive performance of the ETF, since it works with US dollars.
„Discounts“ are therefore to be accepted. However, the past has shown that changes in exchange rates are hardly significant. This means that those who pay attention to a broad diversification do not have to worry much about exchange rate changes.
With market power, ETFs amplify the downturn.
If an investor withdraws money in the course of a downturn, ETFs have to sell shares. There is no argument against that. However, this argument also applies to the actively managed fund. This is due to the „pro-cyclical behaviour“ of investors rather than the funds – because investors sell precisely when they panic.
For this reason, it is important to keep one’s nerve – those who invest for the long term should under no circumstances press the sell button out of fear of possible losses.
How are the profits to be taxed?
A question that also comes up again and again deals with taxation. Today it is already a touch easier than it was a few years ago, since the Investment Taxation Act has now come into force. This means that all investment funds, which are structured according to the same logic, are burdened with the so-called final withholding tax.
Thus, the country in which the fund was launched and the question of whether it is an accumulating or distributing fund no longer play a role.
The custodian bank uses a certain formula to determine the assessment basis for the flat rate tax, which amounts to 25 percent per year. The tax is withheld directly by the bank – unless the investor has submitted an exemption order.
Capital gains up to 801 euros are tax-free – for joint taxpayers the tax-free amount rises to 1,602 euros.
Ideal for security-oriented investors and savers
All those who want to build up assets over the long term should definitely consider this savings or investment option. Because the ETF promises not only security, but also attractive asset accumulation with low fees. Ideal for all those who are no longer in the mood for the ECB’s zero interest rate policy, but who also do not want to take on too much risk.