So you’ve got €1000 maybe a little more and you’re wondering: How to Invest your first €1000 in Germany?
Well, I’ve spent the last five years testing, researching, and even making mistakes to figure out exactly that. And today, I’m going to break it down for you.
Is even investing €1000 in Germany even worth it?
Even small amounts, when invested the right way, can grow into something meaningful. For example, I once bought 120 shares of a stock at €0.94 each.
Today, those same shares are trading at €7.85 that’s a 732% increase. On a €112 investment, I’ve made over €800 in unrealized gains. Imagine if I had invested the full €1000 that would’ve been more than €7000 in profit.
Sounds exciting, right? But here’s the critical point: for every success story like that, there are dozens of cases where you can lose badly if you’re not careful. And that’s where most beginners end up.
So in this guide, I’ll share exactly how you can invest your first €1000 in Germany. We’ll cover what to avoid, like
- why real estate is not realistic with that amount
- what’s actually worth considering
Can you invest €1000 in German Real Estate?
Now, one thing a lot of beginners think about is real estate. After all, it’s one of the most common ways to build wealth. But honestly speaking, €1000 is simply not enough to get into real estate in Germany.
Property prices are high, and even if you wanted to buy a small apartment, you’d need tens of thousands just for the down payment alone.
Add to that the extra costs :
- Notary fees
- Property taxes
- Renovations etc.
And you’ll quickly realize that real estate is not a realistic option for your first €1000. And that’s okay, because there are smarter, lower-barrier ways to put your money to work.
But there are certain things you CAN invest in. For example: you can invest in the stock market, you can invest in cryptocurrencies, you can also invest in precious metals like gold and platinum, or you can invest in other commodities like oil and wheat.
Isn’t Investing Really Risky?
Here you might ask: “Ahsan, isn’t investing really risky?”
You are correct, yes it is risky, but not investing guarantees to keep you poorer decades from now. You just have to look at recent inflation to get the idea.
I’m sure you’ve seen this in your own life: your money isn’t worth as much as it used to be. For me, a trip to Aldi or Lidl that was about €25 last year is now €50.
So the effect of inflation is real and you can see what inflation does to your money, which is why you have to invest it. So that your money keeps up with inflation, and of course, if you do it right, it will also outpace inflation as well.
In most cases, if you want to invest in the stock market, buy cryptocurrencies, or buy commodities like gold or oil, the first thing you need to do is open an investment account.
Related Guide: Is your German Investing App Safe (what if it goes Bankrupt?)
The First step to start investing in Germany
You need an investing account to invest your first €1000 in Germany. I have a detailed list of Investing apps in Germany which you can pick from. Once you have an investment account, simply transferring money from your checking account to this investment account doesn’t work.
Now you have to buy investments, which is the interesting part.
I remember, as soon as the money I sent from my checking account arrived in my investment account, I opened the app to invest it but it was extremely overwhelming.
The app showed so many options: bonds, regions, investing strategies, industries, and trends. I was so confused, as I’m sure you might be as well.
Lump Sum Investing VS Savings Plans in Germany
When you’re deciding where to invest your first €1000 in Germany, the first thing you need to decide. Whether you want to invest the whole €1000 at once or invest it using a systematic investment plan, also known as a savings plan in Germany.
Lump Sum : Invest €1000 in Germany
With Lump Sum Investing you take the entire €1000, choose your investment, and put it all in at once.
The main advantage is that your money starts working for you immediately. If the market goes up, you’re making gains on the entire amount right away. Historically, lump sum investing tends to outperform spreading it out over time because the market, over the long run, usually grows more than it falls.
But there’s also a risk: if you invest your full €1000 right before a market drop, you’ll see your portfolio fall in value quickly. That can feel painful and scary, especially for beginners.
Savings Plan : Invest €1000 in Germany
With the Savings Plan or the Systematic Investment Plan you set up an automated plan to invest smaller amounts regularly, let’s say €100 a month, into your chosen investment.
The main benefit here is something called cost averaging. If the market drops one month, you buy more shares at a cheaper price. If it goes up, you buy fewer, but your existing shares gain value. It smooths out the ups and downs, making the emotional side of investing easier to handle.
It’s also beginner-friendly because you don’t need to worry about “perfect timing.” You just keep investing regularly, no matter what the market is doing. This way, you can also reduce the risk of investing a large amount all at once.
The downside? If the market rises steadily after you start, you’ll miss out on some potential gains compared to investing the whole amount right away.
Both of these options work very well. You can even mix both of them by initially investing a larger amount as a lump sum. For example, from your €1000 that you want to invest in Germany, you can invest €500 upfront and set up a savings plan of €100 each month. And then continue the monthly investment.
Once you figure out a framework that works for you, next we have to figure out exactly where to invest that money.
Related Guide: Financial Planning for Expats in Germany
Exactly how to invest €1000 in Germany
To simplify things, I’ll divide the investing options into two.
- The first includes the stock market and commodities
- The second includes crypto
When it comes to investing in the stock market, you can buy single shares or buy them in bundles, also known as ETFs.
Examples of single stocks include Apple, Microsoft, Nvidia, etc. Examples of ETFs include the S&P 500 ETF, the MSCI World, and the MSCI Emerging Market ETFs.
Why ETFs are Great for Beginners
The benefit of buying a fund or an ETF is that it gives you what’s called diversification.
This is quite important. By investing a tiny bit into a lot of companies, you can make your financial future independent of whether a single company does well. Because if that company doesn’t perform well, then you risk your whole investment.
But if you own a small amount of a large number of companies, you can be quite safe comparatively as the economy goes up and down. On the other side, single stocks do give you a high potential for growth if you pick the right ones.
Similar to businesses like Google or Oracle, you can even buy commodities like gold and oil on the stock market. Again, as individual commodities like Xetra Gold if you are interested in buying gold on the stock exchange, or you can even buy commodities ETFs.
For most beginners ETFs are the safer option to get started with but
How to Pick ETFs in Germany?
There are a lot of different ETFs out there, so When you are choosing an ETF to invest in, you want to look for one that has low fees because each ETF charges what’s called a management fee.
It’s a small fee taken in addition to your investment for giving you the convenience of owning all those stocks in one easy purchase. This management fee is also known as an expense ratio.
This expense ratio could be up to 2–3 percent and even higher. Anything below 0.5% is okay, but I would recommend staying away from ETFs that have an expense ratio higher than 1%.
Ideally, an ETF with an expense ratio in the 0.0-something range would be perfect. Generally, funds or ETFs that follow a specific index have such a low expense ratio. These funds are also known as Index Funds.
S&P500 ETF in Germany
One of the most popular examples would be the S&P 500 ETF, which tracks the performance of the top 500 companies in the United States. There are other examples of index funds like the NASDAQ, FTSE, or MSCI World. These index funds have a very low expense ratio as they track specific indices compared to actively managed funds where specialist fund managers pick and choose specific stocks to invest in.
As people are actively managing these funds, the expense ratio for them is also quite high. Now, here you might think: why not choose a fund or ETF where the stocks are picked by professionals whose job it is to do so?
Well, research shows that index funds generally perform better than actively managed funds.
So not only is the performance generally worse, but the higher costs of actively managed funds can even cut into your profits in the long term.
You also have to take taxes into consideration as well. In Germany, there is a 25% capital gains tax on realized profits and an additional ETF tax on unrealized profits.
How to Buy Crypto in Germany
Now coming to the second part, which is cryptocurrencies. Crypto investing in Germany can be quite interesting but also very dangerous. Personally, I do not try to invest more than 5% of my total net worth in crypto because the amount of fluctuations with cryptocurrencies is extremely high.
The most popular crypto is obviously Bitcoin, followed by Ethereum and XRP. But a large number of crypto investors try to buy altcoins thinking it can make them rich overnight.
For most beginners, it’s not recommended to start with altcoins. Bitcoin can be something to look into if you want to get started with crypto.
There are many other things to consider when it comes to crypto investing in Germany, you can read my article on Crypto Taxes in Germany to learn more.