The retirement savings account enables, for the first time, direct investment in ETFs within the framework of state-subsidized retirement savings.
Standard account vs. Flex account
With the standard account, the government manages a pre-configured portfolio consisting of an MSCI World ETF (60%), an Emerging Markets ETF (20%), and bonds (20%). Costs are capped at 1% per annum.
The Flex portfolio gives you the freedom to choose your own ETFs — for a possible additional fee.
Recommended ETF strategy
For most savers, a broadly diversified portfolio is recommended: – 70% global equities (e.g., MSCI World or FTSE All-World) – 20% emerging markets (MSCI Emerging Markets) – 10% bonds or defensive assets
Risk classes
The AVD (Association of German Investors) defines 5 risk classes (1 = defensive, 5 = aggressive). Younger savers should choose higher risk classes, as they have more time to ride out market fluctuations.
Conclusion
ETFs in the AVD are the best way to benefit from government subsidies and market returns simultaneously.