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Known how: Investing with Funds and ETFs

Before buying a fund, you should ask yourself a question: „What is my investment focus and which fund group is suitable for it? Our advice is: Broadly diversified, globally investing equity funds and bond funds with secure government and corporate bonds are suitable as the basis for a well-diversified portfolio.
Investors can buy either ETFs or actively managed funds. The abbreviation ETF stands for exchange-traded funds. In the large fund database you will find valuations and information for both types of funds. You can see how well the funds have performed since the financial crisis, which top positions they hold and which risk class they belong to. If you already have funds, you can add them to the watch list in the database and keep an eye on them. This is especially helpful for actively managed funds. Their quality can change over time.

Current: Which ETF for which investor type?

Around 1,400 ETFs are listed on the German stock exchange. The huge offer is a great source of food for specialists and stock market fans, but it has a deterrent effect on average investors. After all, in addition to sensible ETFs, there are also many high-risk ETFs that investors can fall into just as easily as with speculative individual stocks.
The financial experts at Stiftung Warentest have analysed which stock indices are suitable for which investor type – from broadly diversifying world indices to special sector or strategy indices and exotic country indices. The article ETF for everyone: Finding the right ETF shows the composition of the global equity market, which countries and sectors characterise it and which index variants investors can choose from. The broadest global ETF reflects the performance of more than 8,600 stock corporations!
Stiftung Warentest differentiates in the article ETF for everyone: The right ETF can be found between different fund types: ETFs that are suitable as basic investments, ETFs for a self-assembled regional and country custody account and ETFs that can be used to supplement or spice up a custody account. The experts also say which ETF they consider superfluous. In this article, investors will find concrete portfolio proposals and suggestions for fresh investment approaches.
Boost your portfolio: Add the right funds with different fund families
Setting up an investment portfolio correctly is uncomplicated: All a saver needs is a security module with interest investments and a return module. A broadly diversifying equity fund World or Europe is basically sufficient as an investment in the yield component. For higher chances on better net yields investors can add however further funds. Our recommendation is that the total of the admixtures should not account for more than 30 percent of the yield component.

Add as many different funds as possible

An idea for a good admixture: If the funds in the portfolio are as different as possible, this increases the chance of a return without higher risk. Based on the world equity market as the underlying investment, we have therefore filtered out funds whose performance differs sufficiently from the world equity market. Funds divided into families
To this end, we have divided 13,000 five-year-old funds into „narrow“ (very similar) and „wide“ (less similar) fund families (see chart below). The benchmark for all things is the MSCI World index – it is at the same time the centre of the close and the wide family with the number 1.
This is how the wide families help. If investors bet on different wide families, they can be sure that they actually add different funds. This is why users of the fund database can now always find information on the families in the fund overview pages.
This is how the close families help. The investor should pay attention to the close family, however, if he wants to exchange a fund, because in the past it did not run so well. He should choose from the same family if he wants to pursue a certain strategy.
Tip: You can filter for funds that belong – or do not belong – to the MSCI World family. In the list view, click on „More Filters“, „Fund Family“ and then on „Closeness to the World Equity Market“. There is also a similar filter for Euro bond funds.

ETF suitable for beginners and professionals alike


ETFs are exchange-traded funds that usually track an index – for example the German stock index Dax. The funds perform roughly like the index, neither better nor worse. ETFs are therefore well suited for investors looking for a simple, convenient investment. ETFs are also comparatively inexpensive because they only track the index. Actively managed funds cost more because they are much more expensive: Fund managers make up the portfolio of individual stocks, which they have to select, monitor and adapt to the market situation. With actively managed funds, investors can perform better, but also worse, than the market represented by the index. If an ETF is typical for the market it tracks, it is first choice for investors from the point of view of Financial Test.

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