Savings plan vs. one-off investment

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Should I save regularly in ETFs or would I rather invest via one-time ETF investment? Learn about both options and the best tips for doing so.

Savings plan vs. one-off investment
  • Level: for beginners
  • Reading duration: 10 minutes
What to expect in this article

ETF one-off investment or ETF savings plan?

The question of which ETF investment option is the right one often causes uncertainty. It is all about the right time: Fluctuations occur quickly on the stock market. In this respect, the time at which you start your investment actually has an influence on the performance of your portfolio.
If you buy at the peak, the markets need at least one cycle to recover. It can take a long time until your portfolio is back in the black after a one-time investment. On the other hand, buying during a bad stock market phase can turn out to be an opportunity for big increases in value in the future. This has brought numerous investment experts onto the scene who have tried to solve the problem analytically.
We can tell you one thing: you can easily implement both a one-time ETF investment and an ETF savings plan on your own. You can even combine both options: For example, you can first invest an amount once and then continue to save for exactly the same ETF investment. ETF savings plans are also very flexible and can be adjusted free of charge.

What the cost-averaging effect is all about

Many established banks suggest that a larger sum should rather be invested in many smaller tranches. The so-called "average cost effect", also known as the "cost-averaging effect", is supposed to help achieve a better risk/return ratio. With ETFs, you have to set up a savings plan to keep the transaction costs in check. On the other hand, renowned fund analysis houses and investment experts deny that the average cost effect has any advantages.
Actually, the result of the professionals is hardly surprising: If you invest 10,000 euros immediately, you can earn returns from the first moment, but are naturally subject to market risk.
  • If you divide 10,000 euros into small savings instalments, you will not be fully invested most of the time and will therefore not be able to achieve any returns.
  • If, in addition, the best returns are at the beginning of the period under consideration, the result looks even worse. The experts' reasoning is, of course, much more detailed and also quantitatively substantiated.
Both recommendations have in common that the statements – scientifically quite correct – are based on data from the past. For all those who invest passively, however, the results are useless, since an analysis of past years says very little about future market developments.
So the discourse of the experts misses the reality for many people. What solutions therefore make sense?

ETF entry in instalments

Even though the right investment timing can only be judged in hindsight, many are afraid of making a timing mistake. This is a natural reaction to the uncertainty about the future course of the capital markets, which exists for good reason. One way to lower this psychological hurdle is to invest in instalments: An existing sum is divided into several parts and invested, for example, at intervals of a few weeks or months.
In practical terms: If you want to invest 30,000 euros and are unsure about the timing, divide the investment into three tranches of 10,000 euros each. You invest these immediately, in one month and then in the following month.
Depending on the development of the capital markets, an instalment investment can have advantages or disadvantages compared to a one-time investment in ETFs. Which way it goes cannot be estimated in advance. The sole purpose of the entry strategy in instalments is to counteract the quite understandable fears of investing money.

Estimate costs depending on the entry strategy

If you now execute an order for 10,000 euros three times instead of a single order, this can cause significantly higher order costs. How much more it adds up compared to investing a single amount depends on your broker's pricing model. There are brokers who offer fee-free orders or a flat rate. With other brokers, an order for 10,000 euros can easily cost up to 40 euros. A broker with low execution fees is particularly important if your one-off investment is not just a single ETF but an entire ETF portfolio.
justETF tip: Make sure you find out about the costs for ETF orders before investing. Our online broker comparison provides you with important assistance and helps you to determine the execution costs for each order size.
You can also set up an ETF savings plan with very high initial rates. This is convenient because the broker takes over the investment and, with free savings plan offers, it is also very inexpensive. Once the high rates have been invested by the online broker, you can reduce the savings plan free of charge to a monthly savings amount. There are no additional costs for adjusting the savings rate. 
justETF tip: In our step-by-step guide to buying ETFs, you can find out how easy it is to invest in ETFs on the stock exchange.

When is a savings plan better than a one-off ETF investment?

You set up a savings plan when you don't have the money for a one-off investment. In that case, the accumulation of assets is done from your current income. ETF saving works because constant amounts are invested even in bad stock market phases. In hard times on the stock market you get a lot of ETF shares at low prices, which pays off in the long run. After all, the cost-average effect does exist for long-term savers, and in combination with the compound interest effect it ensures long-term wealth creation even with fluctuating capital market investments.

Entry strategies for one-time investment or savings plan

We have put together the right entry strategies for you for the possible applications:
Entry strategy One-off investment Investment in installments ETF savings plan
Application Amount available Amount available Amount not available, installments from current income
Entry time immediately immediately, two further orders at self-selected times (e.g. at monthly intervals) at any time, regular payments
Example for an ETF (e.g. MSCI World) Order over 30,000€ one-off 3 orders over 10,000€ each 200 savings installments of 150€ (approx. 17 years)
Chances Capital market development Capital market development as of now and somewhat delayed as of months 2 and 3 Capital market performance for deposit amount, compound interest, cost-average effect
Risks Full stock market risk from the time of entry Distribution of the entry risk over 3 points in time, full stock market risk from the 3rd month onwards Stock market risk for saved custody account holdings
Order route/implementation Trading venue (e.g. Xetra) Trading venue (alternative: 10 large savings installments of 3,000€ each) ETF savings plan with online broker
Execution fees between 0€ and 69,95€ between 0€ and 209,85€ between 0€ and 750€
Quelle: justETF Research; Stand: 16.10.2023

The checklist for getting started in ETF investing

  1. Select investment strategy
  2. Define entry strategy
  3. Select broker
  4. Transfer the amount to the broker
  5. Set up an order or ETF savings plan

The checklist for getting started in ETF investing

Our conclusion: All in good time. Most investors do not even have the choice between one-off investment and saving. Therefore, deciding between the alternatives does not make sense either. But disciplined savers at least have no disadvantages. And with the right broker, the fees for your investment hardly matter, regardless of whether you want to save or invest a larger amount. The important thing is to be there in the first place!
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