A always, many thanks for your valuable inputs @jg12345!Hi there
Your math is certainly better than any guess here. it's essentially an arithmetic problem with some assumptions on returns/period/taxes.
I do not see anything missing, except
- perhaps other commissions (e.g., a platform fee?) you might pay on ETFs or fund holdings.
- The 400E gets reinvested where? Same instrument, I presume?
- you might want to check what happens if returns go down to 2% or up to 4%
Roughly, it seems to me that paying 1.4% more for 30 years (every year) is worse than paying 11% more at redemption/rebalancing.
First, compounded interest will work better by postponing the cost
Second, plainly 1.4% * 30 seems a ton more than 11% either at redemption/rebalancing
But... I think your math should give the best answer.
Here are my answers to your questions:
1) I use a commission-free broker (XTB). Apart from spreads, there are no fees for buying/selling ETFs. For the Pension Fund, I confirmed with my manager that the maximum commission is capped at 1.58%.
2) In my calculations, I reinvested the €400 tax deduction into the Pension Fund for accurate comparisons, though it could also be reinvested in a MSCI World ETF or just used to pay fewer taxes (which honestly, is my current choice
).3) I ran the numbers with 2% and 4% returns, and the ETF always seems to have a slight advantage.
- 4% return:
NOT reinvesting 400E: 85,624 + 12,000
Reinvesting 400E: 102,749
ETF: 103,847
- 2% return:
NOT reinvesting 400E: 63,451 + 12,000
Reinvesting 400E: 76,142
ETF: 77,180
By my math, the 1.4% * 30 vs 11% doesn’t seem to make a significant difference. However, I’m questioning if I’ve done the calculations correctly, as you mentioned it seems a ton more.
Statistics: Posted by bomfimpt — Sat Dec 07, 2024 10:19 am — Replies 2 — Views 57