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Index investing – Compound your way to retirement

August 18th 2016

According to John Oliver host of the Last Week Tonight show, planning for retirement doesn’t have to be complicated nor costly if done correctly. In his recent episode, Retirement Plans, Oliver confronted the vast industry of financial services and their practices. Clarifying that certain financial advisers might not be incentivized to act in the best interest of their clients and illustrated the financial impact of hidden compounding fees negatively affects your expected investment outcome.

Regardless of the humoristic and slightly provocative manner that John Oliver exposed these findings, the outcome imposes that the average investor should start to question their investment methodology. Exposing hidden fees and understanding their impact is the key towards retaining the utmost for one’s retirement. Private investors should migrate to where fees are kept like your milk, under 1%, according to Oliver.

Another topic that was heavily debated by Oliver was the Actively versus Passively managed funds. He claims, that there is growing evidence that actively managed funds in most cases do not outperform the market and that investment professionals, the same people giving investment advice for a living, hold their personal savings in index investments.

All things considered, what should the average private investor do to avoid financial advisors with high fees, broker charges and underperforming active management? According to Oliver it doesn’t have to be that complicated and investors should follow a generic 5-step plan:

  • 1. Start saving as soon as possible.
  • 2. Use low-cost index funds and leave it to compound.
  • 3. If you choose to invest through a 3rd party, be sure that it acts in your best interest.
  • 4. With time, gradually shift into a more bond-heavy portfolio.
  • 5. Keep your fees as low as possible, preferably under 1% of Assets under Management (AuM).

ETFmatic is led by a team of experienced entrepreneurs that believe we all deserve a simple and cost effective way to put our savings to work through highly diversified investments in low cost index funds.

Today, we are available in 17 countries, working with some of the best ETFs in the world and depositing investments in leading financial institutions. By having removed layers of intermediaries, we can offer an end-to-end service for only 0.5% of AUM. We believe this gives our customers a reason to be satisfied, instead of being charged ridiculous fees.

Why not try a simulation, or start a real-money account today?

With all investments your capital is at risk and the value of your investments and the income deriving from it can rise as well as fall.

With all investments your capital is at risk and the value of your investments and the income deriving from it can rise as well as fall. Past performance is not a guide to future performance.