Savings plan vs. individual purchases (shares)
Since this topic has been coming up quite a bit here lately, here's my opinion/the internet's opinion. I'll just make a series out of it "Try to stop the XY posts". The other day there was CCF Money 👀. Also, this is only about stocks and not ETFs. The points can be transferred theoretically, but make less sense with a large diversified ETF (e.g. World / All World).
Very short explanation of terms
Savings plans - I invest continuously(!) sum x in share X/ shares XY
One-time purchases - I invest sum x once, if I like the current price
Savings plan advantages
A savings plan is the simpler variant. One has a low entrance hurdle, since one can save with today's Neobrokern already starting from 1€ free of charge. The variant is connected with clearly less time, since one does not have to concern oneself with the next purchase. One sets here namely on the average price. By not considering the market situation one buys over the year seen sometimes more expensive and sometimes more favorable. This variant offers besides a disciplining effect completely after the slogan "from the eyes out of the sense". A fixed sum is deducted from the account every month, which is not used for anything else. Thus, one learns to handle the net salary better and not to touch the savings plan sum.
Savings plan disadvantages
The biggest disadvantage is the average price. You accept the fact that no matter what market situation you are in, the stock will be bought. Thus, the probability is high to achieve a poorer return at the end of the year.
Individual purchases advantages
The single purchase is the clearly more difficult variant. Nevertheless, one has here the possibility in certain market situations like e.g. the Coronacrash to buy very favorably. It is advantageous here if the reason for the favorable price is not due to a company. Buying Wirecard for 5€ instead of 100€ would still have been stupid... But if the price of a company drops due to a worldwide pandemic, the company remains fundamentally the same. So you have the possibility to buy the same company for X% less. Such situations should be used.
Single purchases disadvantages
Here is just the danger that one cuts off by a wrong timing in the final effect worse than the average price. The danger of overestimating oneself is much greater. In addition, there is the risk that one by constantly waiting for suitable prices in the end significantly less invested.
Conclusion
As usual on the stock market, a higher risk (with success) is rewarded. If I put my money aside and invest only in suitable situations, I normally beat the average price. In order not to fall into the overestimation of oneself, one should fix fixed entry points for the desired shares. Otherwise the danger is great that one waits for even more favorable and even more favorable prices, until one misses the entrance completely and the sum was not invested. In addition, such a comparison is only permissible if the actual savings amount is not used in the one-time purchase. Someone who invests 500€ every month will still have more at the end of the year, even if the other person invested 3000€ at the perfect time. If you prefer a one-time purchase, you should still remove X amount from your account every month. The whole topic can be made a lot bigger than here in this post. However, since it is not intended to be a bachelor thesis, we will only scratch the surface here.
Personal opinion
As with many other topics, most people only see an either or... I myself use both options and this is also the best option. All except two positions (because it is not possible) in my depot are saved monthly. This has the simple reason that I want to see my portfolio grow monthly and bring a certain constant purely. In certain market situations, the savings plan is also increased or there are several one-time purchases to take the cheaper prices. Thus the depot grows constantly and certain market situations are used. Is this now the way to go for everyone? nope. But that is also the beauty of the stock market, everyone can handle it the way he wants. Nobody can predict the future (except @Donkeyinvestor) can predict the future. End of the song: do what you want, because it's your money 🙃
Interesting how you prefer to sit down at something like this instead of your homework....
Ps. my standard GIF no longer exists 🙁
https://de.bergfuerst.com/ratgeber/sparplan
