This is true even at times when the Dax is hitting record highs and many people are wondering whether it can still make sense to invest in the markets now. The answer is yes – but only over the long term. "Over a period of ten to 15 years, I see no problem," says Hermann-Josef Tenhagen, editor-in-chief of the independent consumer website Finanztip. "Not even at the current record highs."
That raises the question of how investors should invest. Many banks and insurers are increasingly promoting managed investment funds or unit-linked life insurance policies. Their argument is that they want to help their clients achieve higher return opportunities in a low-interest environment. But anyone who jumps at this too hastily quickly ends up with the opposite. Academic analyses from the USA and England show that the returns on these investments are often more than half below the market return. The reason for this imbalance is the high costs of actively managed, forecast-based funds. According to an analysis by the European Securities and Markets Authority (ESMA), between 2013 and 2015 investors lost an average of 29 percent of their return to ongoing and one-off fees. Inflation did the rest, as the "Report on Trends, Risks and Vulnerabilities", based on data from 40,000 funds, calculated.
"Index funds or life insurance – how should you invest as an investor?"
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Private investors foot the bill
Quite apart from the timing risks that come with buying or selling shares and that are inherent in such products, the products often also fail to match an investor's personal investment goals. This is because a bank's sales team receives commissions for recommending funds and other financial products. That makes an independent assessment of the investor's asset situation hard to imagine, and on top of that there's a lack of transparency, as an extensive report by the British financial regulator on the state of the asset-management industry in its own country demonstrates. According to it, the profit margins of traditional wealth managers are higher than in almost any other industry. Private investors pay a large part of the bill, because they pay hardly any attention to fees.
Investors can change this by investing – as recommended by consumer advocates and independent financial experts – in globally investing index funds. Digital wealth managers such as quirion make it easier to take the step towards a clearly structured, forecast-free investment using low-cost Exchange Traded Funds (ETFs) and so-called asset-class funds. This results in a particular mix of bonds and equities – from zero to 100 percent per asset class – without paying front-end loads or performance fees. The costs for portfolio adjustments are also included in the quirion fee of 0.48 percent per year of the investment volume. And until 31 December 2017, every new client who signs up for the Basis package at quirion gets the first €10,000 free of charge for good. So you can spare yourself the costs of highly paid fund managers.
