When setting up an investment, you should always be aware that it involves risks. On this page we would like to acquaint you with it in detail so that you can assess the implications and feel secure with your investment.
Risk means that you may receive less than your paid-in capital at the time of payment. The value of the investment can also fluctuate temporarily and fall below the sum of the amounts paid in.
With Ginmon, you invest in a portfolio that contains funds with securities from stocks and bonds. In general, securities offer opportunities for price increases, but price losses can also occur. The return is to some extent the investor’s reward for the risk he has taken. In general, the return increases in line with the risk, but at the same time the possibility of a loss increases.
The following risks should be considered when investing money:
The prices of financial instruments such as ETFs/Index funds are subject to price fluctuations due to dynamic price formation on the global stock exchanges. This applies both to the funds themselves and to the securities included in the indices shown. Prices are determined by supply and demand, are subject to price fluctuations and may fall in value. In extreme cases, a total loss of the invested capital may even occur.
Furthermore, economic, political or social conditions can have an impact on price formation.
Creditworthiness and Issuer Risk
Some fund products carry out securities lending with the securities they hold. This means that they pass on the included securities to third parties for a certain period of time. If this third party becomes insolvent, the securities lent will be lost and the fund will lose its overall value.
For this purpose, some funds use derivatives (swaps) instead of actually buying securities physically. This creates a credit risk for the issuing party (issuer or counterparty). If this counterparty gets into financial difficulties, this can affect the value of the portfolio. Ginmon avoids such products altogether and relies solely on physically replicated ETFs.
ETFs/Index funds can be listed in EUR, but also in foreign currencies such as USD. Since the Ginmon portfolio is quoted in the domestic currency EUR, fluctuations in value can also occur here if the EUR-USD exchange rate changes. Fluctuations can also occur within a fund if, for example, the underlying index rises, but securities included in it are quoted in a different currency and the corresponding exchange rate moves in the opposite direction.
Interest Rate Risk
Changes in the general interest rate level can lead to price fluctuations. If the key interest rate falls, share prices usually rise as investors switch to alternative forms of investment. If stock market prices rise, the prices of fixed-income securities or bonds usually fall. If stock market prices fall, bond prices rise accordingly. In order to keep the overall fluctuation of the portfolio low, these two forms of investment are often combined.
For securities which are only traded in small quantities or only on selected stock exchanges, it can happen that at certain times an efficient price does not form or a security cannot be bought or sold at times.
The performance of ETFs/Index funds is usually slightly below the performance of the underlying assets/indices themselves. On the one hand, the fund company charges a fee for its services, on the other hand, it can never track an index 100%, but only approximately. The extent of this tracking error depends in part on the fund’s approach to tracking. The more liquid the securities are within the index, the more accurately it can be tracked. If dividend payments are not reinvested immediately, this can also lead to a different performance.
In addition to the risks mentioned here, further risks may arise in connection with an investment.
The contents of this platform do not constitute investment advice or an invitation to buy or sell financial instruments. Nor do we offer any legal or tax advice. However, we would like to point out that income from capital assets is subject to capital gains tax, withholding tax and/or other taxes. Some of these taxes are paid directly by the custodian bank. If you have any questions in this regard, please contact the relevant tax authority or a tax consultant.