High legal security
The Fund's assets are legally a so-called fund. This means that the investor's funds in the fund are kept separate from the fund's assets at an independent custodian bank, and neither the fund nor the fund manager can access them.
Therefore, it is protected against the insolvency of the fund company or an embezzlement by the fund manager.
What is the custodian bank
The custodian bank issues shares in the total fund assets to investors. In doing so, up to three decimal places, the exact proportion of the respective investor is the co-owner of the fund's assets. The unit certificates may be resold via the custodian bank.
The custodian bank calculates on a daily basis the price of a fund share. The share price is based on the total value of the individual assets held by the fund divided by the number of shares issued. The share price increases when the securities held are rising in the price and distribute dividends or interest.
Difference between custodian bank and depot
The investor has no direct contact with the custodian bank. For example, you buy the shares via a bank and keep them in your securities account at any bank.
In this case, a distinction must be made between the custodian bank as the credit institution, where the investment fund's assets are deposited and managed, and the investor's custody account at a bank in which his personal securities are held.
One-off system and fund plans
In addition to the possibility to create a large savings sum, many funds also offer savings plans. In the case of a savings plan, you agree with a bank or a free financial service provider that you invest a certain sum on the monthly or quarterly basis.
Such savings plans are very flexible, as you can suspend or terminate the payment at any time for a few months and leave the savings in the fund. You can also change the amount of savings at any time.
Cost averaging effect
Fund plans have a further great advantage, because the question is not the right time to start. By investing the same sums at fixed times, the saver earns less at high rates and at lower rates, more fund shares. As a rule, it achieves a more favorable average price than in the case of a one-time system.
This is called cost-average effect. With a savings plan, you can take the stress of getting the wrong time when buying funds. A savings plan is particularly suitable for long-term asset building, for example, for old-age provision.
Cost factors for funds
When purchasing fund units, of course, there are also costs as the fund company, the custodian bank and the sales department want to be paid. However, with a few bets, you can save a lot of money on a few betting blocks and thus significantly improve your return on investment. Cost of purchase
- Initial charge: The initial charge is a one-time purchase charge on each purchase of fund shares. The initial charge is primarily intended to cover the selling costs. In the case of equity funds, it is usually 5 percent, in the case of bond funds it is usually 3 percent and in the case of open-end real estate funds and mixed funds 4 to 5 percent.
The bureaucracy wants to be paid
- Management fees of the fund company: These are accrued annually and are the charge for the management of the fund. This funds the fund management, among other things. The management fees of an actively managed fund are strongly dependent on the markets in which they invest and the strategy they pursue. In the case of equity funds, the management costs can be 2 per year, while 1 to 2 per cent are usually common. For index funds, the costs are usually between 0,15 and 0,5 percent.
- Custodian fees: For the management of the Fund's assets and control duties, the Custodian shall charge the Fund an annual fee. This is generally 0,1 to 0,3 percent of the fund's assets per year.
Fees for success
- Performance Fee: More and more, fund companies are demanding success fees, especially for equity funds. These fees are generally due when the fund manager proposes his benchmark (eg the Dax). They can be up to 25 percent of the projection versus the index.
- Hig Water Mark: While some funds only calculate the performance fee when the fund was up against the year, others pay the fee even if the fund has lost, but the comparative index was even worse. There are also funds that only collect a performance fee when the fund exceeds a previously achieved high water mark. This type of calculation is the most fair.
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