Investor guide
On this page, I would like to explain to you how you can best build up assets privately and give you tips on how to put this into practice.
The short version
Here you can see a compact overview of how I would invest the capital depending on your risk appetite. A more detailed description follows below.
Low risk
25% of the capital in a private MSCI World ETF savings plan
25% of the capital in a pension policy that also invests in the MSCI World ETF
50% of the capital in AlphaStars
Medium risk
25% of the capital in a private MSCI World ETF savings plan
25% of the capital in a pension policy that also invests in the MSCI World ETF
25% of the capital in AlphaStars
25% of the capital in AlphaCryptos
Higher risk
50% of the capital in AlphaStars
50% of the capital in AlphaCryptos
Hint
Risk here refers to the extent to which your portfolio will fluctuate.
This does not mean the risk of default, i.e. total loss.
As a portfolio manager, I actively prevent this, so don't worry.
If you invest €10,000, for example, it can go down by -30% in a crash. Of course, I try to minimise drawdowns as much as possible, but they cannot be avoided. So you have to ‘endure’ psychologically losing €3,000 in between until prices rise again afterwards. Many people overestimate their pain threshold and then get out at -20%, for example, in order to keep the remaining 80% of their capital safe.
This is one of the biggest investment mistakes that private investors make!
They are guaranteed to destroy capital.
So don't make this mistake.
Incidentally, the spread on wikifolios is quite high at around 2%. They are therefore not at all suitable for short-term trading.
In addition, every sale incurs approx. 26% tax + solidarity surcharge.
I therefore strongly recommend holding your wikifolio for the long term (buy and hold).
Amount of the investment
How much capital do I need to invest to close my pension gap?
The rule of thumb is a maximum of 20% of net salary.
This rule of thumb refers to the average return of the MSCI World ETF of 9%.
As my returns in AlphaStars and AlphaCryptos are significantly higher, you could apply a flat rate of 10% of net salary.
You should only ever invest capital that you:
1) you already have (current account, call money)
2) that you will not need for the next few years to pay bills
Rebalancing
Should I regularly rebalance my portfolio every 12 months, e.g. to restore the original 50%/50% distribution of capital?
​I strongly advise against it!
After all, you have to pay approx. 26% withholding tax + solidarity surcharge on your profits every time you sell.
This would mean that you can only reinvest a smaller amount.
There are also costs of approx. 2% spread.
Therefore, my tip is:
Just leave the capital in the respective assets (ETFs or wikifolios) as it is.
MSCI World ETF - Bond Policy (insurance)
Should I still take out an annuity policy with an insurance company when I am over 50?
No. The products have a term of > 30 years and incur costs that you will not recoup due to the tax benefits.
Should I take out an annuity policy for my child under the age of 30?
That would be a pretty smart move!
The younger the child, the more time the capital has to earn interest.
Time is your best friend here and the compound interest effect comes into its own.
Advantages
1. downstream taxation
2. tax advantages
3. tax grandfathering
4. disciplining effect
5. tax payment can be structured
Disadvantages
1. higher costs
2. earliest possible retirement at 62
3. can only be taken out via an adviser
4. no special assets (ensure the highest possible solvency ratio)
Please do not take out an annuity policy prematurely.
If you decide to do so and then cancel after 5 years, you will definitely make a loss!
The insurance company recoups the costs of the product in the first few years through fees.
The term of these products should be >30 years.
MSCI World ETF - private savings plan
Should I still invest in the MSCI World ETF when I'm over 50?
You can do that, but you shouldn't expect too much.
You simply don't have enough time to build up your assets.
I therefore recommend AlphaStars (equities) and, if you can take more risk, AlphaCryptos (cryptocurrencies).
Should I invest privately in the MSCI World ETF for my child, who is younger than 30?
That would also be a smart idea!
The younger the child, the more time the capital has to earn interest - time is your best friend here and the compound interest effect comes into its own.
What should I look out for when selecting the MSCI World ETF?
1. physically replicating (full or sampling)
2. accumulating (profits are reinvested)
3. currency hedged in EUR
4. lowest possible total expense ratio (TER), e.g. 0.2%
Example: IE000QMIHY81
Returns
What returns per year can I expect?
MSCI World ETF 9% (historical return over the last 40 years)
AlphaStars 31% (backtests 1980 to 2020)
AlphaCryptos >100% (backtests 2017 to 2023)
Broker comparison
Which broker should I use?
There is an overview of this from wikifolio:
https://www.wikifolio.com/de/de/l/mh/brokervergleich
Should I choose a neo-broker because they are particularly favourable?
I advise against it, even if they seem cheaper at first glance.
These are often fintech start-ups that don't survive 10 years on the market.
So it's better to pay around €4 for buying and selling, as is the case with Comdirect, for example. In return, you also get more stock exchange trading centres to choose from, such as Xetra.
It is always best to buy your assets (ETFs or wikifolios) during trading hours between 9.00 a.m. and 5.30 p.m., when the spreads are lower.
Riester- & Rürup-Pension
The short version:
Just ignore the fact that these junk products exist on the market.
You should not conclude such a contract!