The high uncertainty that has characterized the markets in this 2022 can lead to investment decisions that are penalizing in the long term. L’high risk aversion dictated by a bear market can lead to putting the oars on the boat waiting for the storm to pass. But running away from the market leads on the one hand to taking a loss and on the other to being cut off when the wind changes; these decisions can lead savers to see their potential return diminish considerably as the best days of the markets can be grouped into short periods of time and market timing – i.e. entering and exiting the markets – only increases the risk of losing a important part of the recovery of the markets after negative periods like the current one.
Just think that the October it was the best ever for some equity indices such as the Dow Jones Industrial Average (almost + 14%), with markets recovering quickly despite persistent uncertainties at the level of economic fundamentals.
What to do then? One way to overcome emotionality is to stick to well-defined investment rules and look at the timing with which you invest. Spreading your investment over time reduces the risk of running into an unfavorable entry point.
A bear market can be seen as a sort of assist to lay the seeds for greater future returns by leveraging tools such as i Accumulation Plans (PAC) which allow to contain the investment risk in the early stages of accumulation. If the investment is made periodically, by paying monthly amounts, the exposure to market risk is in fact limited in the early stages of accumulation and at the same time you are sure that you are already positioned when the markets return to rise.
Start now and set up a savings plan (PAC) starting at € 1
The union of PACs and ETFs
Another key element to consider is the cost component. According to a cost and performance report released this year by ESMA, Italy has the highest management fees for equity products in Europe, nearly 2%. Tools such as ETF (Exchange Traded Fund) they allow to significantly reduce the cost component and this increases the long-term net yield.
The ETF allows on the one hand to reduce costs for the investor with respect to financial instruments such as mutual funds, and on the other of mitigate the negative impacts of volatility on the portfolio. In fact, ETFs allow a marked diversification of the investment as a single instrument has a multitude of equities or bonds within it, also offering the possibility of pursuing a geographic diversification or by asset. class.
Scalable Capitalan important reality of the European fintech landscape based in Germany, merges these two instruments – accumulation plans and ETFs – proposing for the first time here in Italy the PACs in ETFs.
PACs (which Scalable Capital also calls Savings plans) in ETFs represent an ideal option in this phase of high volatility, also because betting on a basket of shares rather than on a single stock reduces the risks a lot.
Start now and set up a PAC in ETFs starting at € 1
Solutions for investors
Scalable Capital, Europe’s leading digital investment platform, allows you to set your own plan by choosing between over 1,700 ETFs. All PACs have zero commissions, allow you to purchase fractional and settable securities starting from € 1. All PACs can be modified or canceled at no cost at any time.
Deposits are made automatically, on the requested day and time, and are immediately invested in the selected ETF. The intervals of the savings plans can be configured individually by choosing whether to feed them monthly, every two or every three months.
The offer offers a wide and diversified range of ETFs among the most popular on the market at this stage. There are ETF World, made up of hundreds of companies from around the world; then the ETF Europewith shares of widely diversified European companies and the Emerging Countries ETFs, made up of stocks from major emerging nations. And then, for those who want to ride the green trend, there are the Sustainable ETFs that allow you to invest in companies looking at sustainability criteria.
The advantages of PACs
The PACs (or Savings Plans) in ETFs proposed by Scalable Capital make it possible to meet all the current needs of investors. From cost containment to diversification, from interesting performances to maximum transparency and flexibility. Reasons that make this kind of investment even more valid, in a historical moment in which the possibility of staying still and out of the market can prove to be a penalizing choice in the long term.