Investing larger amounts
Why findependent is ideal for it
It was always clear to us that with findependent, we want to create an investment app for everyone. In order to keep the hurdle to start investing as low as possible, the minimum starting amount is therefore only CHF 500. In addition, it is important to us that findependent is ideally suited, both in terms of fees and investment solutions, for investing smaller amounts on a regular basis.
However, this does not mean that findependent is only for smaller amounts. On the contrary, the fee savings of findependent become increasingly significant with larger investment sums.
In this article we will show you how much this makes a difference and why findependent’s investment solutions are also ideal for larger sums.
Small fees make a big difference
In asset management, it is common that the management and custody fees (as with findependent) correspond to a percentage of the investment sum.
With an investment sum of CHF 5,000, the fee advantage of 0.44% with findependent compared to an average of 1.37% with traditional banks (Moneyland study) corresponds to CHF 47 after one year.
This fee advantage is particularly significant for larger investment amounts. Thanks to the flexible fee structure at findependent, the effect is even stronger. With findependent, the percentage fees decrease with increasing investment sums and can thus drop from 0.44% to 0.33%.
With a CHF 200,000 investment sum, the fees with findependent decrease to 0.39%. This corresponds to a fee advantage of CHF 1,960, and over 20 years even CHF 53,776! So small differences in fees can make quite a difference.
For the example, 5% return is assumed (this corresponds approximately to the average return of the findependent investment solution «Balanced» in the last 20 years, but is no guarantee for future market developments). The CHF 2,000 fee-free amount for findependent is not taken into account, otherwise the cost advantage would be even greater.
Since findependent relies on low-cost ETFs, while traditional banks often use their own expensive funds in asset management, and because we also have significantly lower currency conversion fees, the fee advantage is even greater in practice.
In most cases, ETFs pay off more than direct investments
For large amounts, the question arises whether they should be invested in ETFs or funds or rather directly in shares and bonds. Both possible cost savings and the time required for management should be taken into account.
ETFs are ideal for investing very broadly with smaller sums. However, costs (TER) are also incurred for the operation of ETFs. You could save these costs if you bought the investments directly. Instead of 5 to 10 ETFs, an investment solution could be built up with, for example, 100 direct investments in shares and bonds. However, due to the increased number of different investments, the transaction costs increase.
Anyone who wants to invest less than CHF 500,000 is therefore better off with ETFs. This is also the conclusion reached by Finanzmonitor in an analysis (in German).
Direct investments can be more attractive in terms of costs for more than CHF 500,000. On the other hand, the management costs of the many direct investments are significantly higher. If you do not want to put together and manage the direct investments yourself, the bank or another asset manager will charge high fees for this service. The total costs are therefore significantly higher than with a favourable ETF investment solution from findependent.
No compromise on security
Of course, especially with larger investment sums, the question of the security of the investment solution also arises. The following four aspects are important for findependent:
- Experienced partner bank – Your money and your investments are held in your personal account and custody account with our partner bank Hypothekarbank Lenzburg.
- Legally protected assets – The liquidity portion of your investment solution is covered by the deposit guarantee up to CHF 100,000. Your ETF investments are special assets and therefore belong to you and do not fall into any bankruptcy estate of the bank or findependent.
- Regulated asset manager – findependent has a licence as an asset manager and is regulated in Switzerland.
- Offline security – withdrawal orders are only possible to accounts in the client’s name. In addition, for security reasons, the payout account cannot be changed directly in the findependent app, but only in writing.
Asset accumulation vs. asset consumption – what is the objective of the investment solution?
As mentioned at the beginning, the findependent investment solutions are specifically geared towards asset accumulation. Therefore, wherever possible, we use accumulating ETFs that immediately reinvest the income generated.
Depending on your life situation (e.g. after retirement), you may not be interested in further asset accumulation, but in asset preservation or consumption. In other words, you want to use the income generated or regularly use part of your assets for your livelihood. In this case, it is better to use distributing ETFs for your investment solution.
However, the difference between accumulating and distributing ETFs is relatively small, so that findependent investment solutions can also be used for asset preservation or consumption.
What is the best way to invest larger amounts?
Short- and medium-term fluctuations in value are quite normal on the financial markets. No one can reliably predict whether it is a good time to invest. The important thing is to start investing and not let yourself go crazy if things start going down in the first few weeks or even months.
Especially with large investment sums, the temporary loss can quickly be a few thousand francs. Those who invest the entire amount at once are likely to get cold feet more quickly and are more inclined to sell their investments at a loss and turn away from investing.
Although on average it would be most worthwhile to invest the entire amount as quickly as possible, even for large amounts, we recommend a staggered investment. This way you can avoid investing the entire amount at an unfavourable time. The starting point is then no longer so important. And if the prices fall a little first, you can even buy the investment at a slightly lower price with the next partial amount.
However, since the financial markets rise slightly on average, it is not worth staggering the payments into the investment solution over too long a period. Depending on the investment amount and experience, we recommend a staggering of 1 to 2 years. The easiest way to do this is to set up a monthly standing order so that you don’t have to worry about it and automatically invest on a regular basis.
However, if you are currently paying negative interest on the savings you want to invest, it probably makes more sense to stagger the sum over a few months and thus invest it more quickly in order to avoid further negative interest.
findependent is the right place for you, even with a larger investment sum. You benefit from investment solutions with independently selected ETFs and low fees. In this way, you can prevent your savings from being eaten away unnecessarily quickly by high fees. findependent takes care of the investments and the financial markets, so you can sit back and relax.
If you have any questions, please feel free to contact us at firstname.lastname@example.org or call us or chat with us on the website.
Note: At the moment, neither all pages nor the complete onboarding are available in English. However, we are working intensively to change this. Thank you for your understanding.