ENDE Find your number1 min

Level 4 of 713 min+100 XP

Build the machine

A regulated broker, one global UCITS equity ETF, a safe part, a split you can sleep with and a monthly savings plan. One evening. No bank adviser needed.

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Four parts, no more#

The machine has four parts: a broker, a growth part, a safe part and a savings plan. You can set it up in one evening. The finance industry would prefer you to think it takes a degree and an adviser.

I won’t name brokers or funds here. Offers change, and you should be able to choose by criteria. Criteria don’t expire.

Part 1: a regulated broker#

A broker is the account that holds your funds. Check these points:

  • Regulation: licensed and supervised in an EU country. The supervisor’s public register lists the firm. Thanks to the single market, a broker licensed in one EU country can serve customers in the others, so your broker doesn’t have to sit where you live.
  • Costs: custody fee, order fee, savings plan fee, currency fee. Read the price list, not the homepage.
  • Savings plans: the ETF you want is available as a monthly plan, at an amount that fits you.
  • Tax handling: in some countries a domestic broker withholds the tax for you. Germany and Austria work that way. With a broker based abroad you usually declare it yourself. Find out which of the two you’re signing up for before you open the account, not in the week the tax return is due.
  • Boring business model: the app shouldn’t push you towards leveraged products or daily trading. If it celebrates every order with confetti, it’s a casino with better fonts.

Guess first

Part 2: the growth part#

For the growth part I’d use one global equity ETF. One fund, thousands of companies, done.

What to look for:

  • UCITS: the EU rulebook for funds sold to private investors. It sets rules for diversification, custody and transparency. You can spot it in the fund name or in the key information document.
  • Broad index: developed markets, or developed plus emerging markets. Both work. The comparison is in one ETF or two.
  • Low ongoing charge: you saw in level 2 what fees do over 30 years.
  • Size and age: a large fund that has existed for several years is unlikely to be closed.
  • Accumulating or distributing: whether dividends are reinvested or paid out. Details in accumulating vs distributing.

And please don’t spend three weeks comparing two nearly identical funds. That’s not research, that’s procrastination with a spreadsheet. The difference between them is tiny compared with the difference between starting and not starting.

Part 3: the safe part#

The safe part isn’t there to earn much. It’s there to stand still when shares don’t.

Typical choices are an instant-access savings account, fixed-term deposits, or a fund with short-term government bonds of high credit quality. Keep it in the currency you spend: euro for most readers, zloty, koruna or francs for the rest.

The emergency fund from level 2 is not part of this. It stays separate.

Allocation: the sleep test#

How much goes into shares and how much into the safe part is the most important decision in this level. It matters more than which ETF you pick.

Theory says: long horizon, high share of equities. Practice says: the best allocation is the one you don’t abandon in a crash. And I expect you’ll get to test that sooner than you’d like.

Guess first

Now swap the €10,000 for the amount you expect to own in 15 years. Look at the loss in euros, not in percent. Percent is abstract. Euros are a car. If the number makes you want to sell, go one row down.

A lower equity share costs you expected return. Selling at the bottom costs you a lot more.

Part 4: the savings plan#

A savings plan buys your ETF automatically every month for a fixed amount. It has no opinions and doesn’t read the news, which makes it smarter than most investors.

  • Amount: what your savings rate from level 1 allows once the emergency fund is full and expensive debt is gone.
  • Date: right after payday.
  • Split: according to your allocation. With 70/30 and €400 a month, €280 goes into the ETF and €120 into the safe part.

You buy more units when prices are low and fewer when they’re high. Better still: you never have to decide whether today is a good day to invest.

Raise the amount with every pay rise. Half of each raise for the plan, half for life. That rule works without pain.

Rebalancing: once a year#

Over time the parts drift. After good years for shares, a 70/30 portfolio may stand at 78/22.

Once a year, check the split. If it’s off by more than about five percentage points, bring it back: send new money to the part that’s too small, or move money across. Selling can trigger tax, so new money is the first choice. The tax office doesn’t need a tip from you.

That’s the whole maintenance plan. A longer walkthrough is in investing in Europe.

Historical crashes and returns are not promises about the future. This lesson is education, not investment, tax or legal advice.

Next level: the machine runs, and you learn not to break it – tax, crashes and your own brain.

Mission

Quiz · 3 questions

Q1 What does UCITS tell you about a fund?
Q2 What should decide your split between equities and the safe part?
Q3 Your 70/30 portfolio stands at 78/22 after a strong year. What is the first choice for rebalancing?

Sources#

level 4

Done reading?

Tick the mission, answer the quiz, then claim your XP. Or just claim it, I’m not your teacher.

Level 5: Don’t break it

Education, not advice. I don’t know your situation, and past returns promise nothing. Check my numbers, then make your own call. You’re a grown-up.