Investing for beginners in Germany: How to get started

The Essentials in a Nutshell

• There are many options for beginners in Germany to get Started with Investing
• With the help of a brokerage account you can buy Stocks, ETFs and Crypto.
• Gold can be a good alternate to invest in if you are looking for options other than the stock market.

How to proceed

Investing can be a great way to grow your wealth over time, but it can also be overwhelming, especially for beginners. That is why in this article I am going to share Investing for beginners in Germany. How to get started with the various investing options like the stock market, crypto, Real Estate and commodities like buying Gold. Then I am going to discuss taxes and some of the most important things you need to keep in mind when investing your hard earned money

Who is allowed to Invest in Germany?

The most common question I get when I discuss investing is: Who is allowed to invest in Germany? The answer is pretty simple if you are investing your own money you are allowed to invest it doesn’t matter what kind of visa you have, be it:

• Student Visa
• Spouse Visa
• Blue Card
• Permanent Residence.

What to do Before Starting to Invest

Now you know that you can start investing. The first thing that you absolutely need to do before thinking of anything else is create an emergency fund.

Create an Emergency Fund

This fund needs to have 3 to 6 months of your expenses ideally in a totally separate bank account. If you are looking for a free bank account you can read more about them in my Guide on the Best Free Bank Accounts in Germany. Only after you have created your Emergency fund should you be thinking about investing.

Do you have your emergency fund ready? Great! Lets start with investing in the stock market.

Investing in the Stock Market as a Foreigner in Germany

To invest in the stock market you need a “Securities account” or a “Depotkonto” in German language. You can create a securities account with a Traditional bank for example with Deutsche Bank, Post bank and many others. Apart from Traditional Banks you can create a securities account with the so Called Neo-brokers.

Securities accounts with Neo-broker or Traditional Bank?

Both traditional banks and Neo-brokers have advantages and disadvantages when it comes to opening a securities account. For instance, with certain traditional banks, you can receive personalized guidance from their employees to initiate investing. However, these banks charge a decent amount of fees for their expertise and services.

On the other hand, with Neo-brokers, the advantage is that there are no commission fees and minimal additional charges. Nevertheless, the disadvantage is that you have to handle everything on your own. But rest assured, it is not challenging to begin with a Neo-broker.

Lets take the example of my Favourite Neo-broker: Scalable Capital*.

Scalable Capital: Best German Broker?

You can open a Free Account with Scalable Capital* within a couple of minutes. All you need is:

1. A valid identity document like your passport or your German ID-card
2. An email address
3. German Phone Number
4. European Bank Account
5. A valid address in Europe

Once you complete the online registration process you will need to verify your identity using PostIdent. You can do so by either using the online app or by visiting your nearest post office.

I have a step by step video on how to register an account with Scalable Capital which you can follow to open your Scalable Capital account.

Alternatives to Scalable Capital

There are other free brokers alternatives to Scalable as well for example Trade Republic, eToro, Trading212 and many others. One important thing that you should consider when choosing a broker is how they handle your taxes. Most German brokers automatically send your tax data to the Finanzamt while international brokers do not do this. So in my opinion choosing a German broker like Scalable Capital* or Trade Republic* would be the better choice. Once you have registered with a broker now you can invest in the stock market.

How does one invest in the Stock Market in Germany?

Here is where things get a little bit tricky for beginners. For example what is a stock? Is it different than a Share? What is an ETF? bonds? What are derivatives? So many things to deal with.

Lets take a breather! As a beginner you do not need to think about all these things. The 2 most important things in my opinion are

1. What are stocks?
2. What are ETFs?

What is a Stock?

A stock (also known as equity) is a security that represents the ownership of a fraction of a corporation. This entitles the owner of the stock to a proportion of the corporation’s assets and profits equal to how much stock they own. Units of stock are called “shares.”

To put it simply, any company that is publicly traded on an exchange such as the New York Stock Exchange or the Frankfurt Exchange can be purchased and sold by investors through the trading of stocks. For instance, let’s take the example of Apple. As a publicly traded company, you can buy and sell Apple shares through your securities account as a private investor. Buying individual stocks has higher risks compared to an ETF.

What is an ETF?

An Exchange Traded Fund, also known as an ETF, is a type of security that follows an index, sector, commodity, or another asset and can be bought or sold on a stock exchange, just like a regular stock.

Essentially, an ETF is a bundle of stocks that are grouped together and can be purchased collectively.

For instance, the iShares S&P500 ETF tracks the top 500 companies in the US, and purchasing a single share of this ETF means investing in 500 different companies.

ETFs vs Individual stocks: Which has less risk?

ETFs can be considered to have less risk compared to individual stocks for several reasons:

1. Diversification: ETFs are a collection of stocks, bonds, or other assets, which means that investing in an ETF provides diversification across multiple companies, industries, or asset classes. By spreading the investment across a variety of holdings, the risk is reduced, as losses from a particular security may be offset by gains from others.
2. Lower Volatility: The diversified nature of an ETF means that it tends to have less volatility compared to an individual stock. The price of an individual stock can fluctuate greatly due to changes in the company’s financials, management, or other factors. However, the impact of such events on an ETF is diluted across its entire portfolio, leading to lower volatility.
3. Professional Management: ETFs are usually managed by professional investment managers who conduct extensive research to construct and maintain the portfolio. This can provide investors with access to expertise and resources that they may not have on their own.

However, it is important to note that ETFs are not completely risk-free and can still experience losses.

Should beginners invest in ETFs?

Now you know what stocks and ETFs are the next question that might come in your mind is which stock or ETF should you invest in?

As a beginner I would say that you should steer clear of individual stocks and look into ETFs. I have a detailed guide on how I research stocks and ETFs if you are interested to know how to pick the best stocks and ETFs to invest in.

Two of my favourtite ETFs are:

• MSCI World ETF
• S&P500 ETF

How much should Beginners invest?

You might also be wondering how much money should you invest each month? This totally depends on you. I would say start with a small amount and get the ball rolling. Once you are comfortable you can increase your investment amount.

Whichever stock or ETF you decide to invest in, with Scalable Capital* you can start with investment amount of as low as 1€ so there is no excuse for you to start investing from today!

How to Buy Cryptocurrency in Germany?

This is a very contraversial topic and not many people want to invest in Crypto. I totally understand it and if you do not want to know about this option you can totally skip it and go to the next option!

For those who are interested in crypto investing please bear in mind that this is an extremely risky investment class. I personally invest a very small portion of my portfolio in Crypto and I know the risk that I might loose 100% of this money.

Alright now that you know about the risk, lets start with the definition.

What is a Cryptocurrency?

A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities.

Which Crypto should beginners start with?

There are many Cryptocurrencies to choose from. The oldest and the most popular is Bitcoin. Some people actually incorrectly use the world Bitcoin when they want to talk about crypto. However there are hundreds of other crypto currencies like Ethereum, Cardano, Solana Dogecoin etc.

Where can people in Germany buy Crytocurrency from?

For someone in Germany who is interested in buying Crypto you generally have 2 options. First would be an exchange (it can be centralized or decentralized) and the second would be a broker.

Examples of Exchanges would be Coinbase* or Binance*, these are typical exchanges where you can buy crypto trade it and even send the crypto currency to an external wallet. I have discussed wallets in this video guide if you want to know more about them.

With brokers you can buy and sell crypto but you cannot move it to an external wallet. Example of a broker would be Scalable Capital, Trade Republic and eToro (I would not consider eToro as a regular exchange it has very complicated transfer policies).

I have many step by step guides on how to buy crypto using eToro, Scalable Capital and Trade Republic which you can read here.

How to buy Gold in Germany?

In this guide I want to cover the various ways you can buy gold as an investment, so I will not discuss Jewlery. There are several ways to buy gold in Germany.

1. Physical Gold as Gold Coins or Gold Bars
2. Precious Metal Deposits
3. Gold as a commodity on the Stock market
4. Investing in Gold mining companies

Buying Physical Gold in Germany: Gold Coins and Gold Bars

You can buy Physical Gold as either Gold coins or Gold bars in Germany. The price of physical gold depends on the weight of the bars and coins. The weight of gold bars is usually given in grams and ranges from 1 gram to about 12.5 kilograms. With Gold coins the weight usually varies between one ounce (31.1 grams) and one tenth of an ounce.

The price differences between coins of the same weight and bars are relatively small. Usually bars are somewhat cheaper due to the less expensive production.

Buying Gold Gold Coins and Gold Bars in Germany

When buying gold bars make sure it is 99.999% pure and certified by the London Commodities Exchange LBMA. Otherwise, you may have to expect slight deductions when selling the bars.

With gold coins in Germany there is a large secondary market and you can resell them quickly and easily if necessary. These gold coins are some of the most reliable options as investments:

• Krugerrand
• Maple Leaf
• American Eagle
• China Panda
• Britannia
• Vienna Philharmonic
• Buffalo
• Nugget – also called kangaroo
• Centenario Mexico

What are the Costs of Buying Physical Gold in Germany?

Buying physical gold is not cheap. The largest component of the cost is the trader’s margin, also called spread. The smaller the weight, the greater the difference, since the production and distribution costs are proportionately higher compared to the pure gold value.

Where can you buy Gold Coins and Gold Bars in Germany?

You can either buy Gold coins and Gold bars online or from a physical store. The biggest issue is whether you can trust the seller or not.

Suppliers such as Degussa and Pro Aurum have branches in major German cities, where you can easily buy gold. The advantage is that you can buy directly in one of the stores from a trusted retailer. The disadvantage is that you usually have to pay more in the branches than on the Internet. You can also buy gold from your local precious metal dealer.

When buying online, it is not only the cheapest price that matters, but also whether you can trust the retailer or not. You can use online portals like gold.de and gold-preisvergleich.de to get more information about the current prices and dealers.

Buying Gold as Precious Metal Deposits in Germany

Another option for people in Germany for gold investment is the precious metal deposits or “Edelmetall-Depot” in Germany. In this type of gold investment you can buy ownership of gold, which the vendors store in vaults. This form of gold investment is comparable to the purchase of physical precious metal in terms of security.

The cost of a precious metal deposit is usually higher than buying physical gold and storing it in a safe deposit box. For example, some providers charges a fee of about 0.75 percent of the gold value per year. With this additional cost there is a less of a hassle as you are not directly handling the gold but it all depends on the investor.

How to Buy Gold as a commodity on the Stock market?

If you have a securities account you can either buy Physical Gold CFD or Physical Gold ETFs. Physical Gold CFDs are not recommended for beginers at all. CFDs are complicated products and need at least basic knowledge of how CFDs work.

Physical Gold ETFs on the other hand are one of the easiest way to invest in Gold as you can buy and sell these ETFs when the stock markets are open.

There are many Physical ETFs from famous ETF providers like Xtrackers on Scalable Capital*.

Which is better : Invest in Gold mining companies or Physical Gold?

Historical comparisons show that the gold price is responsible for only a fraction of the price development of gold mining companies. There are many other factors that influence the stock price of gold mining companies, such as the success of the company and the general development of the stock market. That is why this option is not advisable if you are actually interested in investing in gold.

Taxes on Investments in Germany

Taxes only come into play when you realize your gains or losses. Meaning that you only pay taxes when you make a sale. With stocks and ETFs there is a capital gains tax of 26.75% only on the profit.

If you buy a stock or anetf at a price of 100€ and sell at 200€. at a profit of 100€ you will have to pay a capital gains tax of 26.75€. This tax only applies on realized gains so any profit you see on scalable capital is only subjected to a tax when you sell that stock or ETF.

Gold and crypto fall under the same tax rules, any gold or crypto you keep for more than 1 year can be sold tax free if there is a profit involved. In case you sell your gold or crypto within 1 year of purchasing it you can get a maximum profit of 600 euros per year. For crypto there are certain other conditions which I have discussed in this video.

Conclusion

Investing in the stock market can be a great way to make money and improve your overall financial stability as a Beginner in Germany. However, it’s important to have a long-term investment strategy and be prepared for volatility. By having a brokerage account and learning the basics of stock trading, you can start investing in the stock market in Germany. Additionally, by being up-to-date on financial news and being prepared for volatility, you can ensure that you’re making the best decisions for your money. You can also invest in Crypto and commodities like Gold to diversify your portfolio. One thing you should always remember is that there is no such thing as a RISK-FREE investment!

*Affiliate link, I may earn a commission if you use the link and make an account at no additional cost to you

Disclaimer: None of the content in this article is meant to be considered as investment advice, as I am not a financial expert and am only sharing my experience with stock investing. The information is based on my own research and is only accurate at the time of posting this article but may not be accurate at the time you are reading it.