2 easy and affordable ways to invest
You think investing is complicated and inaccessible, and is only for professionals in this field. You think, that investing is too risky and if you invest you will lose your money. You want to invest, but you've never done it before, you don't know what and feel incompetent. Many people tell me, that they feel this way, so I decided to describe two investment opportunities, which are easy and accessible to everyone.
Investments in ETF (Exchange Traded Fund)
Exchange-traded funds (Exchange Traded Funds) represent financial instruments – a basket of securities, whose shares are traded on stock exchanges. They are structured like this, that they follow the performance of a particular stock index (for example S&P 500, Nasdaq), market sector (technologies, healthcare, energy), geographic region, trend, commodity (oil, gold), development strategy (growth, aggressive growth) and others.
Investments in ETFs are suitable if our goal is long-term investing (buy and hold strategy) and purchase price averaging. Their purpose is to provide broad market exposure and by their very nature they are a diversified financial instrument. By purchasing one unit of an exchange-traded fund, we buy part of all companies, which it tracks and so we spread our investments across a larger number of assets, reducing risk.
Typically, ETFs are passively managed, resulting in lower annual management fees (most often in the range 0.1% – 0.4%) compared to mutual funds. Entrance fees are a few euros and you can usually find full information about all the companies, of which an ETF is composed.
Capital gains from ETFs (if purchased on a European exchange) are tax-free in Bulgaria. Exchange-traded funds have high liquidity – they can be bought and sold easily, you only need to open an account with a financial intermediary (broker). They are suitable for periodic investment as well as for small ones, as well as large sums.
Keep in mind, that not all ETFs are available to European citizens. European citizens can buy ETFs, which comply with certain EU regulations – these funds usually contain UCITS in their name.
Ssavings plan in a mutual fund
Another option for easy and affordable investing in Bulgaria is investing in a mutual fund through a savings plan. I will give an example of the savings plans offered by Karoll, but also other investment companies in Bulgaria offer similar plans. Briefly, through the savings plan, you get the opportunity to invest in leading global companies with small monthly installments through the global investment company.
You decide how much to invest and how often. For some of the funds, the minimum contribution is 100 BGN. per month, and for another part there is no minimum contribution. The installments are not fixed and you can change the amount each time according to your available funds. You don't have to deposit money every month. If needed, you can withdraw from the accumulated funds, no penalty fees.
The entrance fee is approx 1.5% and gradually decreases over time, and with some of the funds, lapses entirely after the 84th installment. The expected return from the different funds is between 4% And 12% annually. It is presented net of fund management fees, but without full transparency about their size, which I would consider a disadvantage. The lack of complete information about all companies is also a disadvantage, in which the funds themselves have invested.
The savings plan gives us a choice for investment in different options of funds and investment goals - balanced, balanced to high yield and high yield option, as well as selection of different management companies.
You get a diversified financial instrument, professional active management and high liquidity. Capital gains on these investments are tax-free. This instrument is suitable for long-term investing (buy and hold strategy) and a purchase price averaging strategy.
You can make your own combination by choosing several funds, focused on different geographic regions, sectors of the economy, trends and investment goals, suitable for your profile as an investor.
Sources used: https://karollcapital.bg/bg/spestoven-plan-ot-karoll