An investment is by definition never completely without risk. Before you start investing, ask yourself these questions:
Do I have sufficient buffer?
It's best to set aside three to six months net wage so you have enough cash for an unexpected expense, like a new washing machine. Therefore, only invest with money that you do not need in the short term. A savings account is the ideal product for your buffer, because your money can be retrieved daily. For this, you can use the Express Account at MeDirect. For savings that you do not need for a minimum of 3 months, you can choose the ME3 Savings Account, which gives you a higher return but is subject to a notice period of 3 months.
Are your investments properly diversified?
Spread your savings yourself, in a way that makes you feel comfortable. Investments are subject to fluctuations in the financial markets and can therefore rise or fall multiple percentages in one day. If you are not comfortable with this, it is better if you invest in less risky products such as a Term Deposit Account or an ME3 Savings Account. Long-term investments have a better chance of generating a higher return than, for example, a savings account, but if this will keep you awake at night, it's probably not worth it.
An investment fund is a financial product that brings together a large number of investors. This means you are investing in a basket of instruments, which may consist of shares, bonds, real estate and/or cash. One of the biggest advantages of an investment fund is the spreading of risk. This is because a fund invests in tens to even hundreds of different shares or bonds. It is important to know that a fund does not have a capital guarantee and that the value can fluctuate. In general, a fund has a low entry-level. At MeDirect you can purchase most funds from 100 euro.
An investment fund is managed by a fund house with professional managers. These managers are often assisted by specialised analysts who look for equity or bonds that provide the best opportunities. A fund house charges management costs. These costs are part of the running costs of the fund. You do not have to pay these cost separately, as they are incorporated in the net asset value (NAV) of the fund.
MeDirect does not charge any additional entry or exit costs or transaction fees. All management costs are transparently listed in the detailed fund pages on the MeDirect website.
One investment fund can indeed differ from the other. In general, bond funds are less risky than private equity funds. Often, it also depends on the region or sector in which the fund house invests. For example, an equity fund that invests in one specific region will be more risky than an equity fund that invests worldwide, because the manager is able to better diversify the risk. The best way to check out the risk score of a fund is in the KIID. This is a document where you can find the most important investor information. This score or SRRI rating is between 1 to 7. 1 indicates a lower risk with a lower return and 7 indicates a higher risk with possibly a higher return.
First and foremost, it is not a good idea to evaluate the returns of your fund portfolio on a daily basis. Investing is best looked at over the long term. The financial markets can fluctuate substantially. Long-term investing gives you enough time to recover from a possible short-term stock market correction.
If you allow your portfolio to be managed at MeDirect— also called wealth management or discretionary management — MeDirect provides a sufficient global distribution of shares and bonds. This also limits a possible decrease caused by one specific region, which, for example, might just be going through a rough time. Keep in mind that stock markets can experience a low period and that a short-term negative return is possible.
You can find the long-term returns of the wealth management portfolios on the website of MeDirect.
At MeDirect, your savings fall under the Belgian deposit guarantee scheme. This guarantees funds on savings accounts and term deposits up to a maximum of EUR 100,000 euro. All investment products and wealth management portfolios are given into care at professional caretakers, also known as custodians. These custodians only ensure the safekeeping of your investments on your name. They will always belong to you. Even if something would happen to MeDirect. However, there is no capital guarantee provided. Your investments can decrease in value.