Level 0 ETF basics · Part 2/14

ETFs for beginners: the five basic decisions

ETFs are among the most widely used ways to take part in the stock market broadly diversified and at low cost. Getting started involves five decisions.

Bars per year over 30 years: amount paid in and portfolio value of a savings plan of 200 euros a month
Savings plan of €200 a month, a 7 % return and 0.2 % ongoing costs, after 5, 10 … 30 years: gray is the money paid in, green the portfolio value. After 30 years, €72,000 paid in stands against about €226,700. The gap grows mostly in the later years. The return is an assumption, not a forecast; real prices fluctuate.

1. Time horizon

Stock prices swing sharply in the short run. Over one to three years, losses in broad equity ETFs are common; over long periods they are rarer – but never ruled out. Money needed in the near future therefore carries a different risk than capital committed for the long term.

2. Brokerage account

ETFs are held in a securities account. Providers differ in order fees, savings-plan offers and trading venues. The broker comparison sets the fees side by side.

3. Choice of index

An ETF is only as broad as the index it tracks. The MSCI World covers around 1,400 companies in developed markets; an all-country index adds emerging markets. The main distinguishing features:

  • Diversification across countries and sectors
  • Ongoing cost (TER), usually 0.05–0.25 % for broad indices
  • Fund size – small funds are closed or merged more often
  • Distribution policy : distributing or accumulating
Live data

Ready-made starter portfolios

Ready-made starter portfolios
PortfolioETFsStocks
MSCI World onlyEUNL 100 %1250
US Tech (S&P 500 + Nasdaq 100)SXR8 60 % · EXXT 40 %519
70/30 World / DAXEUNL 70 % · EXS1 30 %1252
World + S&P 500 (50/50)EUNL 50 % · SXR8 50 %1316

One broad world ETF is often enough. Details linked per portfolio.

4. Savings plan or lump sum

A savings plan buys a fixed amount at fixed intervals; when prices are low, it acquires more units (cost averaging). The savings plan calculator shows how rate, horizon and return interact. The comparison with a lump sum is covered in savings plan vs lump sum .

5. Market declines

The MSCI World has fallen by more than 30 % several times, most recently in 2008/09 and 2020. Selling in such phases turns a paper loss into a realized one. Whether and how quickly a market recovers is not known in advance.

This article is for information only and is not investment advice.