Die Rolle von Exchange Traded Funds (ETFs) als Finanzanlageinstrument in der modernen Altersvorsorge: Eine umfassende Analyse

Abstract

Motivation and Statement of the Problem In the recent past the inflation rate has been soaring up to ridiculous figures. But as it stands it has cooled down to around 3 percent (as of January 2024).3 Nevertheless, private investors and savers had to deal with great losses in their portfolios in the recent past. A great number of economic crises such as the financial crisis of 2008 or the COVID-19 pandemic in 2020 are one of numerous reasons why investors in Austria have lost faith in traditional investment products such as a savings account. One thing is certain, that leaving your money in a savings account yields hardly any profits. At times even negative interest rates are imposed on the saved money. Furthermore, the current pension system in Austria must be scrutinized. A rising number of people in Austria are reaching a high age, leading to an increase in state expenditures for pension payments. There is a reason why the government is considering raising the retirement age. The so called “Generationenvertrag” which is supposed to ensure financial security of pensioners, is in danger to collapse because there working force in Austria is shrinking encountering a growing number of pensioners. As a result, an increasing number of people are at risk of poverty when retiring from work. The reason why is that with the pension payments alone it will be difficult for people to maintain the standard of living they were used to. Therefore, private investors are challenged to seek after investments options which bring more profit. It is more important than ever to start early so that the compound interest effect can fully take effect. Facing these challenges, ETFs are becoming increasingly popular not only among institutional investors but also among private investors as well. For example, the iShares Core MSCI World ETF (ISIN: IE00B4L5Y983) has managed to achieve a total return of 12% p.a. since launch back in 2009.4 Content Structure and Methodology The following thesis consists of the following core topics: In the first part of the paper the threatening risk of poverty for elderly people in Austria is addressed. Afterwards the concept of ETFs, their historical development will be discussed, along with their risks and characteristics. Additionally, the taxation of ETFs in Austria and how to pick the suitable ETF will also be covered. In the second part of the paper a survey is conducted to analyse the investment strategies of private investors in Austria and how they are preparing for the pension. The conclusion will offer a summary and outlook on how ETFs may continue to develop. Concrete Results of the Thesis As a result, it can be reported that over two-third of the Austrian citizens surveyed consider retirement planning as important or very important. Only a small percentage relies solely on the pension system of the state. This indicates that there are certain concerns about the pension system in general. Nevertheless, many don’t feel sufficiently informed to actively address the imminent risk of the pension gap. Especially the females surveyed lacks financial knowledge and they also feel uncertain about how to prepare themselves für their financial future. When it comes to the other demographic factors such as age, degree or residence, no significant differences were assessed. Therefore, there is a clear need for comprehensive educational training, particularly to highlight the long-term benefits of ETFs for retirement planning, even possible with small contributions. Those who are invested in ETFs (approx. 35%) are satisfied or very satisfied with their investments. This shows that the people surveyed share a positive experience when it comes to ETFs. However, a significant group is not yet invested but they are eager to learn more about ETFs. This shows that ere is a strong wish for basic knowledge, assistance with selecting the right ETF and the right investment strategy. A huge group of people also appreciate the lower costs, diversification, and a potential higher return on investment when it comes to ETFs especially compared to traditional investment products. This reflects the growing popularity of passive investment instruments like ETFs. What also stood out is that there were hardly any significant differences between the investment strategies of those who use ETFs and those who prefer savings accounts. Both groups pursue a long-term strategy (> 10 years), and they describe their strategy as generally moderate. Thus, they aim for a balanced mix of risk and return. However, those who invest in ETFs are still more willing to take on higher risk and invest in riskier assets such as cryptocurrencies. Due to demographic changes, the pension system in Austria is endangered to collapse. At the same time, the working force is shrinking which sooner or later will lead to a misbalance between those who contribute to the pension system and the pensioners. This is why most investors in Austria are increasingly feeling obligated to take control of their financial future by themselves. ETFs therefore represent a promising and modern solution to build a financial cushion for retirement. Most investors in Austria also follow a long-term investment strategy. This enables that the advantages which comes with ETFs are used in full effect because ETFs is an investment instrument which is suitable for long term investors. While elaborating this bachelor thesis it turned out that ETFs offer a cost-effective way to take part in global market trends with a diversified portfolio. ETFs are also simple built, so this enables a passive buy-and-hold strategy. Short-term market fluctuations that may come up when investing in ETFs are smoothed out by the global market development over the long term. Therefore, it is up to institutions like the government, educational establishments, and financial service providers to make ETFs appealing to the citizens as an attractive and long-term financial instrument for retirement. The survey proves that there is a general interest among the population to learn more about ETFs.

Date of Award	2024
Original language	German (Austria)
Supervisor	Dietmar Buchner (Supervisor)