Today I made a phone call to BinckBank and it seems all the things I found out during my research are correct. Conclusion: a broker specialized in index investments, like Meesman in The Netherlands, is ideal for people who want to invest smaller amounts of money on a monthly basis. However, you need a “normal broker” (and the cheapest one at that! in The Netherlands this is BinckBank) if you have bigger amounts of money to spend.
We now have a lot of cash on top of our emergency fund just sitting in a savings account against less than 2% interest, it’s getting ridiculous. We have narrowed our investment options down to two.
Option 1: increase our monthly investments
In order to spread our investments we could go from investing €600 a month to €1300. The husband thought €700 extra from the endowment is a nice number. Transaction fee is 0.5% so this would cost us €6.50 a month. It will take years and years for the endowment to finally be invested in the stock market this way. Also, each month we have at least €1.000+ of our income that we didn’t spend…so I guess we’re hardly going to touch the endowment anyway. I don’t know whether this statement will hold true when the kid arrives ;-).
On top of the transaction fees there are ongoing fees of 0.5% on average a year. Fortunately, Meesman managed to solve the tax dividend leak for the Dutch…so this might come down to almost nothing for the world-wide funds. However, we also have emerging markets and bonds.
Another great advantage of this option is that dividends are reinvested in the fund automatically. That’s great, so we don’t have to worry about anything.
Option 2: don’t fret and just dump bigger amounts into the stock market in one go!
This is the scariest version….(sorry jlcollinsnh, it does scare the hell out of us, guess that’s what makes us human? 😉 We know it’s about time in the market, not timing the market…but the stocks are at an all time goddamn high!) If we were to invest €10.000 in one go (there’s more to invest than that, but you know I am hesitant with stating the actual numbers) that would cost €16.50 in transaction fees. The ongoing fees for the Vanguard all market fund are only 0.25%. However, since the fund is based in Ireland there’s no tax advantage for the Dutch here.
The disadvantage here is that dividends are not reinvested automatically, but paid out every quarter. If we would receive €100 in dividends it would cost €10 in transaction fees to reinvest that in the same fund and thus only investing €90. Yikes! We could always transfer that amount to Meesman and invest that amount against €0.50 transaction fees and invest €99.50. I guess it would take a long time for the lower ongoing fees at BinckBank to make up for that loss?
The tipping point for option number 2 is roughly around €2000. Investing that amount would cost the BinckBank minimum of €10 in transaction fees (€6.50+0.10%). Investing €2000 with Meesman will also cost €10 in transaction fees (0.5%). For example, investing €3000 with Binck would also cost €10. But that same amount with Meesman would cost €15.
What would you do? A bear market would come in quite handy right now…
Disclaimer: I am not a professional investor, nor do I claim to be an investment advisor. You are solely responsible for your own investment choices.