Index funds and the ABC of long-term investing
The above two interrelated terms form the foundation of an investment strategy that is rapidly gaining popularityall over the world. According to leading international analysis centres, passive, index-based investing is the most profitable option for most investors in the long term.
Index funds have now finally gained the attention of the pension fund managers of Estonian-based banks – largely due to the interest shown by the members of Tuleva. Unfortunately, the banks’ fund managers and marketing staff often use faulty logic when discussing index funds, whether out of ignorance or bias.
Please allow me to provide you with a few tools for identifying such fallacies. For this purpose, I present – right here in the Tuleva blog – a series of articles aimed at explaining the principles of passive investing, divided into a total on nine chapters.
I have also established a few ground rules for these articles.
1: I will try to avoid financial jargon insofar as humanly possible.
2: I do trust the interested readers to be reasonably intelligent and literate, but I do not expect them to be proficient in mathematics or investing.
3: I will try to be as brief as possible, but as specific as necessary. Since you happened to visit the Tuleva blog, I will assume that you have no interest in fancy populist slogans, but would rather give these issues some thought yourself.
4: I will be honest. I can tell you straight away that I have been convinced by the many studies concluding that passive index-based investing is the smartest way for most people to generate long-term yield on their savings. I will explain my conviction in these articles.
Table of contents
Subsequent chapters will be published over the coming months. You are also welcome to visit our Facebook page!
Please do not hesitate to contact me, if something remains unclear, or if you disagree with a certain aspect, or agree with me but have suggestions with regard to matters deserving further specification or attention: tonu.pekk(at)tuleva.ee.
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Our guide makes transferring your pension easy via your internet bank. 5 minutes, no costs involved.
Membership fees are used to develop the Association and to represent the interests of members. The fees of our first members were used to raise the fund’s initial capital, introduce Tuleva to the general public, and make preparations to start the fund, including application for an activity license from the Financial Inspectorate. From this point forward, membership fees will be used for the following activities:
Every euro saved gives a Swede almost a third higher pension than the same amount saved by Estonians. Estonia needs a smarter and measurable pension strategy.
As the first and only association representing pension savers, Tuleva is a credible partner for Ministry of Finance and state legislative bodies. We participate in pension strategy discussions, where next to the officials only banks and insurance companies used to be represented.
We help to make better laws. The laws that protect the people. The laws that maximize our profits from our, not banks’ savings.
We have our first achievements. For example
We do not organise demonstrations or spread random complaints. We are direct, we analyse issues and offer constructive solutions.
Tuleva’s main principle is that people themselves save money for their future, using contemporary technologies and bypassing unnecessary middlemen and costs as much as possible.
Every year, each member who has transferred their second or third pillar to Tuleva pension funds, earns a member bonus. Member bonus is very small at first, but it will grow together with member’s pension assets. Bonus is transferred to your personal capital account at Tuleva. This is your ownership stake in Tuleva capital and this stake can earn you additional profit.
When Tuleva grows, our funds under management grow and we add new products to our offering, then the association will earn profit. The profit is then divided among members, as set in our Articles of Association.
As always with profit from entrepreneurship – this depends how well our venture is doing. The founders are convinced, that the 125-euro joining fee pays for itself many times over. But we do not give promises.
At the end of each year
Every member has a vote on annual general meeting and has a right to elect and be elected to Tuleva’s board of directors and other supervisory bodies. This is the official part and it is very important.
Every day we share our ideas and experience among Tuleva members in our Facebook group, e-mail, phone and working groups. Among our community, there are people who care about the society and have very different skills. Many are ready to take responsibility for ensuring us a better future.
Tuleva team listens very carefully to our members and uses their ideas for making Tuleva better. We are only starting and believe that the power of thousands of smart people can be used for increasing our common good.
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Your maximum contribution amount to third pillar is thus 15% x gross annual income. If your annual income is over 3333 euros per month (gross), then you can contribute to third pillar 6000 euros.
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