Have you thought about long-term saving? Think about your future today. Robert Sochacki, Chairman of the board of BETA Securities Poland
Whether effective saving is real today?
They say time is money and there is a lot of truth to that. When thinking about saving, time plays a key role. By systematically saving even small amounts, we can accumulate a lot of capital after many years. Albert Einstein himself said many years ago that the greatest invention of humanity is compound interest, a kind of magical phenomenon that can be compared to a snowball that, rolling downhill, slowly gains momentum, and at the same time increases its volume and grows faster and faster. So it’s worth thinking about it today. There are many forms of long-term saving and investing in the stock market is one of them. Many of us associate the Stock Exchange with numerous, incomprehensible charts, monitors and constant forecasts of what and when will go up and what will go down. This is undoubtedly the truth that is present in short-term investing or speculation. In long-term investing, the moment of investment recedes into the background and gives way to proper asset allocation and diversification. The inwestor should abandon the element of randomness, which is trying to control the best moment to Invest (the legendary hit at the bottom), in favor of regular depositing and ivesting depending on the availability of cash and the chosen strategy. One of the cheap and truly accessible to everyone investment tools offered by the Polish market today are investment funds with passivei (ndex) investment policy, and especially their exchange-traded variety – ETFs (Exchange Traded Funds). Their above-average results are primarily due to the fact that they „protect” investors from the terror of high costs that are characteristics of most traditional investment products in Poland.
Can ETFs be a tool for long-term saving?
ETFs are designed as long-term savings tools. These are investment funds whose task is to provide the same rate of return as the mapped stock index, redardless of whether it is in an upward or downward trend. This makes tchem highly transparent. The stock market index should be understood simply as a portfolio of selected companies, e.g. the S&P500 index is a portfolio of the 500 largest US companies. The longer the investment horizon, the more traditional actively managed investment funds perform worse than their respective stock market indices. This is evidenced by numerous statistical studies and the interest of investors in ETF funds, which has been constantly growing for years. Over the past 20 years, it has undoubtedly been one of the fastest growing segments of the financial markets with assets exceeding $10 trillion. ETFs are well known to investors around the world for their transparency, low cost and attractive investment returns. These funds also allow for long-term saving under the third pillar for future retirement via IKE and IKZE. Today, BETA ETF is the largest ETF provider on the Polish market.
What benefits can ETFs offer your company?
We try to convey the simple idea that investing in the capital markets is simply about diversifying your assets. Contrary to popular opinion, we believe that a place for transparent, diversified investments in the capital market is justified for most of us. I do not think that ETFs or stock market investments should be incorporated into the company, rather it should be a private and separate part of each of us’s savings. On the other hand, investing in capital markets can be compared to running a business/your own company. Just as a business needs a clear strategy, a well-defined investment strategy is crucial to achieving your financial goals. And just as a successful business requires operational efficiency and cost control, a successful investment strategy requires profitability and low fees. This is where ETFs come in offering a passive investment strategy. This means that they simply track the market index rather than trying to beat it through active management. Thanks to this, we avoid high management fees and achieve high efficiency of the investment proces, just like simplifying operations can reduce business costs. Another analogy is thinking of ETFs as a team of employees. Just as a business needs a diverse team of employees with different skills and characteristics, a well-diversified portfolio is important to optimize risk and increase stability. ETFs provide diversification that gives you exposure to many assets a tonce, just like a team of employees with different skills can work together to achieve a common goal. Finally, ETFs offer transparency, just as a business should be transparent in its operations and finances. ETFs give investors confidence in what they are investing in, allowing tchem to make informed investment decisions. In conclusion, ETFs offer a cost-effective, transparent and diversified wealth management solution for clients who are striving to achieve their financial goals. They provide the benefits of a passive investment strategy, low fees, transparency and diversification, allowing you to achieve your goals, especially in the long term.
Robert Sochacki, CFA (Chartered Financial Analyst). Chairman of the board of BETA Securities Poland SA and a member of the supervisory board of AgioFunds TFI SA. Associated with the financial market for over 25 years.
Last Updated on April 27, 2023 by Anastazja