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ETF funds

The friendly little brother of mutual funds. Similar or higher returns than mutual funds. For an exceptionallylower price. Even up to 50x lower commissions than mutual funds.

Are you interested in how to buy ETF funds,

that invest in stocks of US companies? Because as of 2018, EU citizens are prohibited from investing directly in US ETFs.

Do you want precise, technical instructions

on how to open a trading account and use the trading platform?

Want to learn how to find the right ETF funds

despite the US ban? Legally, very cheaply and quickly?

What you need to watch out for in taxes

linked to ETFs so you don't end up being taxed 3x? (Which can also take from you up to 50% of all returns).

An optimal and resilient stock portfolio

How do you build an optimal and resilient stock portfolio with ETF funds?

Register for the

Practical webinar on ETF funds.

Attendance is free for purchasers of “Fortuna: The Art of Wealth” book. You will be notified about the webinar date by email.

Fill out the information below to register for the ETF Funds webinar

ETF stands for Exchange Traded Fund. Simply put, this type of fund invests in the largest companies from a specific list. Buying and selling takes place through a computer. Therefore, whether to buy/sell the shares of a certain company is not decided by people, but by a program that is only interested in whether the value of the company is so large that it is included in the desired list (Index).

We know several types of company lists (indices) on the basis of which ETF funds are formed:

S&P500 funds - invest in the stocks of the 500 largest companies on the US stock exchange
Technology ETFs - invest in the largest companies that specialize in technology.
Medical ETF funds - invest in the largest companies in the field of medicine.
And so on across different industries (e.g. financial, energy, commodity ETF funds).

Furthermore, ETF funds are also formed according to the parts of the world from which the companies whose shares the ETF fund buys come from. Thus, we know ETFs that focus on companies in the US, but also in Europe, Asia (mainly China), South America and others.

A key advantage of ETFs over conventional mutual funds is that investing is managed by a computer program rather than a human.

Because people are people. Sometimes we have a good day, sometimes a bad day. Some evenings we drinka bit too much, fight or are in a bad mood due to foolishness (gaining weight or cutting a finger). And exactly these people are asset managers in mutual funds. Of course, we can completely trust them that they are professionals and that they will try to distribute the assets in the best possible way with all their knowledge and responsibility.

And yet they are only human. And even good managers make mistakes sooner or later. With each success, the pressure from investors increases. The more money flowing in, the greater the pressures. The greater the pressure, the more fatal the mistakes. Mistakes that could be forgiven for unknown, average managers are all the more shocking for well-known, established ones. Therefore, history has shown that even if some expert succeeds in some predictions, they will fall to the average in the long run. Even more. The average performance of the best Wall Street managers is no more than 50%. You can get this average also if you putyour cat’s food into several cups and stick the names of the stocks on them. If you do this consistently, every day in a row, you will create a large enough sample. Each time, you simply decide on the share on the cup from which the kitten eats first. That’s the way it is with us humans and in all professions. Therefore, don’t just believe me, but search, educate yourself, get a second, third, fourth opinion. And never trust the professionbecause every profession is limited by human characteristics.

With ETF funds, the human factor is eliminated.

The program itself buys/sells stocks and creates a portfolio. Artificial intelligence helps him with this, which of course is not smart, but has the ability to calculate thousands of different options in a fraction of a second. That is why the funds’ computers are positioned as close as possible to the stock market. The shorter the cable, the more powerful the computer, the sooner it will react. It’s a fight for thousandths of a second. ETF funds thus carry out trading every 15 seconds. 4 times per minute. 240 times per hour. 10,800 times a day. Why? Because that way they get the best average price.

Of course, the mutual fund people can’t compete with that. Mutual funds therefore typically make only one purchase per day, usually at the end of the trading day.

Yield of ETF funds

Despite being run by a computer, it does not lag behind the profitability of mutual funds. Even more. It mostly outruns them. The reason is, of course, the human factor. Of course, the mutual fund people can’t compete with that. Mutual funds therefore typically make only one purchase per day, usually at the end of the trading day.

However, ETF funds and mutual funds have one big difference. Mutual funds are much, much more expensive. Typically, the management fee for a mutual fund is between 2-3 percent. It doesn’t seem like much, but over the years this commission collects – 50% of all returns.

Let’s say that you invest one hundred euros per month for forty years and with an annual historical return of 10% you achieve e.g. 800,000 € in revenue.

Unfortunately, the mutual fund will get half, – 400,000 € less for you.

From your return of 400,000 €, the devaluation of purchasing power due to inflation must be deducted, which reduces the amount several times (depending on the inflation rate).

ETFs do not need a lot of money to operate for the following simple reasons:

They have few employees. They do not need to pay troops, brigades, divisions of consultants, managers, secretaries, directors and others in offices.
In fact, they don't need big, beautiful, luxurious, modern offices in the most expensive locations either.
They don't waste your money trying to convince you with ads that they are the best for you.
They use your money to buy stocks, not commissions from the agents who convinced you to buy.

For these reasons, management fees can be very low. Even 0.1-0.2%.

When investing in ETF funds from Slovenia, you may encounter considerable challenges. Let’s highlight only the most obvious ones.

Availability of ETF funds

At the top of the list are ETF funds that invest in shares of American companies (that is, the USA and not Mexico. However, this has been legally prohibited since 2018. Alternatives do exist, but they are quite difficult to find.

Otherwise, there are European intermediaries, but you find yourself in a vicious circle. Low commissions of ETF funds + high commissions of intermediaries from Europe = investing in a mutual fund. In short, intermediaries from Europe are not a good way to invest in ETF funds.

So what is the best way? The answer is clear and practical but needs some explanation. So register for the webinar here.

Taxation of investments in ETF funds

It is necessary to choose ETF funds that are established in countries that have an agreement with your country of residence on the avoidance of double taxation. Because in the end, taxation is not “just” double, but rather triple.

When paying out dividends, in case of an incorrect choice, it is necessary to pay tax in the country where the ETF is registered, in the country where the shares are issued and also in your country of residence.

One of the solutions is to choose an appropriate ETF that does not pay out dividends but reinvests these returns.

ETFs in terms of handling dividends and interest

Taxation therefore depends on whether you sell ETF points. For the most part, investing in ETFs is for a period longer than five years. Taxation of dividends may thus occur on an annual basis. Since you probably do not need this money, it is better to avoid this tax and choose an ETF that will not pay you dividends but will reinvest them directly.

On this basis, we distinguish two types of organization of ETFs:

Distribution

i.e. those that pay you dividends, which of course results in the obligation to declare income and taxation.

Accumulation

some also call it capitalization. They reinvest the dividends directly and buy new shares with this money.

The costs of ETF funds are very low compared to mutual and share funds. Still, it’s good to know all the costs before choosing an ETF. Even so, they will not grow even close to the amount of mutual fund costs, but still.

Costs of intermediaries (brokers) when buying ETFs

Some brokers charge a fixed amount for their service, which can range from 0 to approx. 15 €.

Others charge a commission on the purchase/sale value. It is therefore a one-time commission. This can range from 0 to 0.5% of the purchase or sale value.

In principle, it is therefore better to choose an ETF where the amount of the commission is fixed, regardless of the amount of the purchase or sales.

The additional costs of brokers when buying ETF funds (by this I mean exclusively foreign brokers) are:

Compensation for inactivity (it is necessary to pay it if you do not buy/sell anything for a certain period. It is an amount from 10 - 50 € per year).
Annual account management fee
Currency exchange fee (let's say you're paying in euros and buying an ETF in dollars). You'll often come across this "hidden" fee with brokers who advertise themselves as "commission-free".
Payment when withdrawing funds from a trading account.

Before deciding which ETF (there are over 700 available) you want to invest in, check its availability and liquidity. It is imperative that it is traded on the largest stock exchanges in Europe and the USA. This means that the ETF is liquid and you can sell your investment at any time.

With ETFs, transfers between funds result in the obligation to pay capital gains tax (of course, if it has been generated) as well as sales and purchase fees.

Most ETF funds (also due to the very low commission) require a minimum deposit amount, which usually starts at over 3,000 €. After this first payment, subsequent payments may be lower.

ETFs are therefore a great investment opportunity for ordinary people. Mainly because they leave almost all the return to you (unlike mutual and stock funds).

In the beginning, it is necessary to gather some more information.

So register for the ETF funds educational webinar.

All calculations and results in the techniques described in the book are examples and are not a guarantee of future results or for all users. Author Martin Korošec, official representatives of the publisher and the company are not financial advisors, stockbrokers or registered investment advisors. All types of investments or named companies or financial instruments are presented for educational purposes only and not for the purpose of recommending a purchase. Consult your chosen licensed advisor before investing.