Which Platform Suits Me Best?

 

Every platform has its advantages and drawbacks. Some people prefer to invest in ETFs through an online brokerage account because of the low entry costs. Others prefer unit-linked funds (dt. ungezillmerte fondsgebundene Lebensversicherung) offered by life assurance companies due to lower taxation.

 

The most important factors to determine whether a platform is the ideal one for are

• total costs
• the investment products available on the platform
• the timeframe over which you wish to invest.

 

In the end, the best option is going to be the one that yields the highest returns. If you wish to invest larger sums over a longer period of time, a unit-linked fund could be the right choice for you. If you want to make a short-term investment yielding lower returns, you might opt for a brokerage account. In this article, you will find the most important information on these two options.

 

 

 

Brokerage Accounts

 

There are numerous offers for brokerage accounts. It is advisable to choose one in which you can also invest in small sums. Since there are countless investment opportunities to choose from, you need to find the right mix for yourself.

 

Keep in mind that only because something has performed well in the past, it does not necessarily need to perform well in the future. Market conditions can also change, for example due to currencies, taxes or political changes. The question is: Which investments will continue to yield higher returns than the average?

 

There are several sectors, so-called megatrends, which are expected to experience a significantly higher economic growth and thus increase in value despite inflation. Your choice depends on the level of risk you are willing to take and which sustainability criteria is important to you.

 

The capital gains tax on profits of low or medium risk investments is quite low. For long-term investments that yield higher returns, however, a unit-linked fund is likely to be the better option. The reason for this is that profits generated by these funds is are not taxed in Austria.

 

 

Unit-Linked Funds (dt. Ungezillmerte fondsgebundene Lebensversicherung)

 

This model is very popular in Austria. Investors pay 4% insurance tax on deposits, so they don’t have to pay capital gains tax on profits. As mentioned before, this platform is suitable for long-term investments.

 

But what does ungezillmert mean? What is Zillmerung? Zillmerung is a calculation method that was developed over 100 years ago by the German mathematician Dr Zillmer and named after him. It is an unfair allocation of costs in which the costs for the entire term have to be paid in the first few years. As a result, in the first few years, little remains in the portfolio that can be invested.

 

Due to Zillmerung, the fund’s surrender value is lower compared to the amount invested in it, especially in the beginning. In other words: If you cancel your unit-linked fund before its term ends, you will get considerably less money than you invested up to this point.