ING puts "CAP" on investments

A few days ago ING Direct introduced the option “CAP” in its consumer investment funds family, “Investimenti Arancio

The CAP (Capital Accumulation Plan) allows to automatically invest a pre-determined sum (minimum €100) periodically. In Italy, there is no obligation and CAP can be interrupded in any time.

CAP has the advantage of averaging out buying prices, damping market’s highs and lows, that may be useful if market goes down or is highly volatile. The common example is that if I buy today a share at €50, and next month I buy one at €48, the average is €49, virtually losing only €1 instead of €2 that I would have lost if I bought 2 shares at the same time. You could consider it a way to reduce risk (obviously it also limitate possible returns).

CAP allows you to build your capital in time, saving a small fraction of your earnings (remember that not more than a fraction of your capital should be binded in risky investments – as funds are), and it fits for long-term investment, that is why in most country CAP is strictly associated to retirement funds.

Personally, I don’t like CAPs that much: I think people should actively watch what their money is doing (althought this does not mean one should sell or buy at any market oscillation). If you look weekly or monthly to what your money is doing, in the same time you could invest something: this is especially true for ING Direct’s funds, since there are no fees or expenses. In other words, my impression is that CAP impiles a “do not worry” attitude against our hard-earned money, thay I do not consider a winner one.

Original post (in Italian): ING mette il PAC a Investimenti Arancio

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