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How do monthly contributions work?

Through the Curvo app, you can easily set up monthly contributions through SEPA Direct Debit. The money is debited the first business day of the month and you can edit or revoke the contributions as you wish through the app.

How long does it take for the money to be invested? It can take up to 8 business days as there are two factors at play:

1) SEPA Direct Debit

Under SEPA Direct Debit, funds are debited even if the customer does not have sufficient funds on his bank account. For example, if you set up a direct debit of €300 but you only have €200 on your bank account, the full amount of €300 would still be debited and transferred to the account. What happens though is that your bank will come to us a few days later and automatically take the money back. This is a risk if for instance the funds have been invested by then.

As all customers are new, NNEK provides a 4 business-day window as a safety net, to see if the customer's bank will call the funds back. There is a plan on building a more robust "trust" system for customers who have been using Curvo for a couple of months. The idea would be to reduce the length of this window as the "trust" in a customer increases after successful contributions have taken place.

2) Initiating the purchases

Purchases are not instantaneous as you are not purchasing ETFs through an exchange but the funds are purchased directly from Vanguard and BlackRock (institutional mutual funds instead of ETFs). The price is set once per day.

The reason the execution can take a few days is because of the settlement period. This is the time it takes to confirm a trade. On a stock exchange, there's a clearinghouse that facilitates trades between buyers and sellers. Even though trades take multiple days to settle, the clearinghouse can guarantee the trade, which is why you can see those trades directly in your broker account. Part of the broker fee goes towards paying the clearinghouse for this service.

There's no clearinghouse when you purchase the funds directly from Vanguard and iShares. For the funds in the portfolios managed by NNEK and available through the Curvo app, the settlement period is T+2 and T+1, so respectively two business days and one day after the order execution. That's the period you need to wait to get confirmation of the order.

This way of investing is more suited for the long term. You don't get immediate trades, but there's no bid/ask spread and also no need to work with middlemen like a stock exchange or a clearinghouse.

Updated on: 31/08/2023

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