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If you’ve saved money in a fund, you know that the value can vary a lot, especially in the short term. During the onset of the crown crisis, for example, many experienced the value of the funds falling significantly, but fortunately many of the “losses” were temporary in nature. Many people are experiencing the same thing these days.
So it is important to remember that fund savings are long-term economic:
- You put the money in funds and leave it there and “amend” for five, ten or twenty years, so that hopefully you can withdraw plus of what you deposited, the day you need your fund savings.
- The value of fund savings can fluctuate widely during the savings period, and there is a greater risk associated with fund savings than a regular savings account at the bank, but at the same time the potential return is greater than that of the fund. account, which means your savings grow more in funds.
However, let’s take a closer look at this with risk, for how great the risk is. For real for fund savings? Can you, for example, lose everybody the money you have put into funds?
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If everything can be lost
The short answer to the question is “yes”, subwayin (Pooh!) Then you should have the ultimate bad luck.
– The probability that the entire portfolio of companies will fail is microscopic, but greater than zero, says savings economist Bjørn Erik Sættem in Nordnet to Dinside.
Master of Business Administration Hallgeir Kvadsheim presents some examples of the risk of fund savings losses in a post on Pengeverkstedet.no:
- If you have the money invested in a large global equity fund, this means that everybody the companies in which the fund has invested must declare bankruptcy simultaneously so your money is lost forever.
- Do you save on a VPS or shared savings account (ASK)? It is of who is the legal owner of the securities, so if the investment firm changes, of own values.
- Mens, you save in an investment or fund account, It is the life insurance company who is the legal owner of the securities, and then the solvency of the life company is a point, even though it takes a lot for a Norwegian life company to go bankrupt.
However, both Sættem and Kvadsheim point out that if everything goes bust at once, you have much more important things to worry about than savings. Then there is a new world war or “financial ragnarok” in the pipeline, according to them.
But there have been bankruptcies and losses
Anne-Grethe Krogh is special adviser on politics and society at the Union and is clear that the funds, of course, can go bankrupt.
– The financial crisis in America is a keyword here: middle-class Americans still live on the streets, because they lost their savings. Retirees went back to looking for jobs for the same reason, he tells Dinside.
None of us who have spoken in connection with this case can join us. Norwegian examples of all the companies in which a fund has invested have gone bankrupt at the same time, so that savers have lost all their money.
Sættem at Nordnet only knows of one Norwegian life insurance company that has gone bankrupt, or rather has been “put under public administration”, the police company Silver.
– This company was acquired by Storebrand after bankruptcy, and the clients came out well in my eyes, says Sættem, adding that he works at Storebrand when they acquired Silver.
Bankruptcy: Distribute the money to several banks
Strict laws
When you save in a regular savings account at a bank, your deposit is secured:
All Norwegian banks must be members of the Banks Guarantee Fund and deposits are a positive credit card balance. Y the cash balance in the stock savings account (ASK) insured for up to two million in each bank (this means that if you have more than two million in a Norwegian bank account, you should consider distributing the money to multiple banks).
For fund savings, on the other hand, there is no corresponding coverage scheme. On the other hand, there are laws and regulations that will insure money savers to the best of their ability.
– If you save in mutual funds, there are strict requirements in the Mutual Fund Law for the fund’s share holdings and the like to have a composition that ensures an “adequate distribution of the risk of loss,” explains University Professor Dag Jørgen Hveem at BI to Dinside.
– In practice, the fund will have invested the funds in several dozen companies and there are limits to the amount of capital that can be invested in a company, Hveem continues.
Savings economist Sættem at Nordnet notes that there are EU rules, more specifically UCITS rules, that require equity, pool, or fixed income funds to invest in less 16 stocks and, at the same time, the fund cannot invest more than ten percent of the fund’s capital in one company.
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Total bankruptcy, so what?
Krogh in Fagforbundet explains that if things go wrong with all the companies in their funds, that is, total bankruptcy, the small savers will be referred to the so-called “civil law processes”.
– So the power and resource relations between small savers and the company / bankruptcy assets are, to put it mildly, skewed, says the special advisor.
In the event of the bankruptcy of a Norwegian life insurance company, the clients (the insured of the life insurance company) have a preferential claim of unlimited amount over other creditors.
– In practice, this means that customers are served first. In other words, the probability of losing money as a result of a bankruptcy in a Norwegian life company is very small, says Sættem, referring to Silver’s example.
Do this before saving funds
The funds that are more and less risky
As we initially noted, fund savings are long-term, and those who are uncomfortable with constant fluctuations in the value of their savings may want to keep them in their account.
In any case, it is convenient to think about spreading your savings, that is, having the eggs in more than one basket. For example, you may have something in your account and something in a fund.
The beauty of fund savings is that the “eggs” are already pretty scattered, according to Kvadsheim: You own not just one bond, but a fund that owns dozens of different bonds, and you own not just one company or stock, but units in it. a fund that may have spread its money over thousands of different companies.
Still, it is possible to say something about the different types of funds and how much risk of loss is associated with them (or the possibility of winning for that matter):
- The lowest risk in general is associated with global index fundSince 1500-2000 different global companies are often invested in, ergo a good diversification of risk. However, even global index funds can cut their value in half from time to time.
- The highest risk is associated with narrow industry funds and geographic funds in underdeveloped markets. The potential for good additional returns can also be good in such funds, some of which “spice up” your portfolio.
- Bond fund can be risky in financial or debt crises, and capital fund They are very volatile projects with potential losses in case of defecation.
- The more “limited” the fund (with a more focused investment strategy), the greater the risk associated with them.. An equity fund that invests in “new technology” or renewable energy may have risen 100 percent in the last twelve months, and it goes without saying that the height of decline is great. Such a fund can drop as much as 60, 70, and maybe 80 percent if we have another major crisis of some kind (although not many of the portfolio companies would go out of business).
