Are 3 Trillion Euros in Danger Now?

01.12.2016 • Investing

From Julien Backhaus – Wealth Protection Up-To-Date (Germany) –

In the past year, investors have invested 3 trillion euros in ETFs worldwide. These are Exchange Traded Funds, or “exchange-traded funds”. Now more and more experts are doubting whether these ETFs are safe in private households’ deposits. Just a tip of the weekend in a large magazine shows that the care is justified.

ETFs have numerous advantages over previous fund designs. They are much more transparent, because you can act as investors daily on the stock market. Previously, you had to wait for the provider’s course the following day to find out how good your fund share is. At the same time, you only have to pay the difference between buying and selling prices on the stock exchange as a “purchase fee”. This eliminates the initial charge for traditional funds.

This has already ended the number of uncontested advantages of ETFs. You will hardly tell a journalist or a banker. Because ETFs are one of the modern favorite children of financial media.The issuers do not earn too much when the fees are low.

But they are hoping for a brisk trade and the resulting costs, which in turn turn into the pockets of banks and ultimately also advertisers of the banks, ie newspapers and internet portals. ETFs are therefore often misrepresented: as an index fund. ETFs, however, are generally funds that can rely on both indices and on the wildest actively managed mixes.

In addition, ETFs do not always contain the values that investors believe. So-called “derivatives”, which represent the value of other securities, are supposed to improve the performance of ETFs – allegedly. Even index funds fall back on the instrument. The so-called “swaps” allow the fund managers to map the Dax development, for example, without actually having Dax shares in the portfolio.

Most investors do not know this. Finally, the funds can even charge fees that are hidden at first and also at a second glance. So-called performance fees are part of the management’s contribution to the profits of such funds, if they exceed 5% per year, for example. Then you will reimburse 10% or 20% of your excess income.

This does not happen with any ETF, however the risk is present. In addition, as an ETF investor, you also need to know that some funds have high internal costs, contrary to all opinions in the expert magazines. A fund on a so-called index, for example, is almost as expensive now as 1.7% of deposits, as is actively managed funds.

However, most investors do not know that indices are provided by the government or other important bodies, but that everyone can create an index. This can – at least theoretically – also give every person certificates or, after some legal examinations and hurdles, even funds, ie ETFs.

Under the cover of so-called “indices”, funds are launched in these days, which promise “inflation protection” – or “guarantees”. All this has nothing to do with the index funds that you can expect.


Today, many private investors are looking for protection and security. For as the building societies announced on the weekend, the business breaks there. Private households are therefore actively looking for other savings – and these are index funds. It is a pity that the industry has gathered so many risky funds under the general term “ETF”. Therefore, make sure to invest in real indices, the Dax, the Dow Jones or the S & P 500 in the investment. Also pay attention to the amount of fees and read if you have enough time, also the fund prospect to the hidden fees to determine.

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