Tough times for Luxembourg's passive ETF investors

"I think I've lost everything I gained over the last six years. That hits hard." Matthew (name changed by the editors) grimaces on the other side of a video call in April 2025. We first speak to him just as stock markets are absorbing the shock of renewed US – China tariffs. ETFs, so exchange-traded funds (you can read more in an earlier article of ours here), have taken a hit, with the MSCI World Index dropping up to 10 per cent in just one month: its steepest decline since the COVID-19 crisis. Matthew seems tense, nervous, unsure, yet tries to retain his composure. He first started investing in ETFs mid-2019.

"I became interested in ETFs due to the low interest rates around that time. I was a rather conservative saver prior to that…" After realising that traditional saving had yielded little over the past decade, he gradually sought advice, eventually turning to ETFs. He tells us that his portfolio consists of 70 per cent MSCI World and 30 per cent MSCI Emerging Markets, following the classic passive allocation. "Right after I started out, the COVID-19 crash hit. I panicked for a brief moment, but to be fair, the only real investment approach is to have a long-term plan and stick with it." He shrugs. "So I held on."

"Why shouldn't I participate in that?"

Serge Weyland, CEO of the association of the Luxembourg fund industry (Alfi), looks at the appeal of ETFs beyond its affordability. "In my opinion, ease of access is probably the main driver. ETFs are usually available on brokerage platforms. You can buy them alongside stocks and bonds, and they provide a nice, easy way to diversify your investments." That ease of access is expanding. Weyland points towards the rise of neobanks, online brokers, and even AI-driven advisory tools as further acceleration the adoption of ETFs, especially among private investors.

Prof Thorsten Lehnert is a full Professor of Finance at the University of Luxembourg. His research clusters, among many others, around investor psychology and market volatility. "Investing becomes easier over time, " he adds. "It's not that people are better educated, or that they think a lot before making decisions." Instead, he points to the highly individual, almost isolated process of modern investing, often done with just a few taps on a smartphone. "The availability of apps changes the way people make decisions. In the past, you'd call your broker and say, 'Look, I want to buy X, Y, Z.' That exchange involved more thought than opening the Revolut app."