Synthetic ETF8. Juni 2022
The ETF provider obtains a guarantee of the performance of the selected index from the swap partner, a bank. In return, the ETF provider builds up a carrier portfolio with stocks that are relatively well-known and frequently traded – this way, the bank is assured of a performance. The different performances, which are completely normal, are balanced out by the partners.
However, the problem could arise that the bank files for insolvency and thus the performance of the chosen index could no longer be delivered to the ETF provider. In this case, the ETF provider would be forced to access the equity portfolio, which would then have to be monetised.
ETF government bondsIf the equity basket has a lower value than the index, the ETF provider would subsequently have to tap the bank’s collateral and sell it. This could be, as already mentioned, government bonds or cash holdings.
Since March 2017, this business has been strictly regulated, so that the differences of the portfolios, i.e. the swap value, must be 100 percent collateralised.
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If you are interested in building up assets over the long term, you first have to open an ETF custody account. Here you can choose between the services of a branch bank or a direct bank – it is important to check the fee model in advance. As a rule, the custody account at a direct bank is free of charge.
Now it’s time to look for the ETF:
On comparison portals one gets a relatively good overview here, whereby first and foremost one should always pay attention to the total expense ratio.
The risk class should also not be ignored. High profit opportunities are attractive, but they also mean a higher risk. It should be noted, however, that the risk decreases the longer one invests. Because in the long run, short-term price fluctuations can be compensated for „without any problems“. See www.indexuniverse.eu to solve any problem and connect with them on social Media
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An important criterion is always the purchase price. Even if it is often only a matter of differences in the decimal point range per direct trader as well as trading centre, it is always important to choose the most favourable offer.
What is an ETF savings plan?
Ideally, you open an ETF savings plan. In this case, a certain amount is invested – month after month. This means that every 15th month, 100 euros and 50 euros are invested in an ETF. Here, too, a long-term investment horizon is recommended, as this allows the so-called cost average effect to unfold its best effect.
Incidentally, it is not possible to say across the board how high the return of the selected ETF will be in the future. For it is not even possible for experts to predict how share prices will develop in the next 5, 10 or 15 years. However, a look at the past can help.