Students in Germany can also invest in various investing mechanisms while being a student in germany and having a student visa. In this video I explain how Investing for students in Germany works
I came to Germany in 2015 as a Masters student from Pakistan and it took me 5 years of being in Germany before I started investing in stocks and cryptocurrency.
So today I will be talking about how one can invest in the stock market and cryptocurrency while being a student in Germany. Ill talk about stocks and ETFs, about the taxes involved and what my strategy was when I started investing.
Students coming to Germany for their education usually have a blocked account or some sort of Scholarship where they receive their funds on a monthly basis. Most of the times this monthly amount is more than what they use and what is not used remains in their account. This keeps happening for a couple of month until they find a part time job to fund their Education and some students are able to save money on top of their expenses. Many dont know that they can invest in stocks and cryptocurrencies because they simple dont know they can and those who do dont know how to invest.
So the first thing that is needed is
1. Brokerage account to buy stocks
Creating a brokerage account is similar to creating a Savings account as long as they invest their own money and that money is not needed for their studies and expenses during their stay in Germany for education. That is why investing in Stocks is not like running a business and no special permission is needed for that if one is not day trading and holding a position for medium to long term.
There are many options for opening a Brokerage account but my Favorites are Trade Republic and Scalable capital. Both have their pros and cons but I found both to be very good. I have videos on both Scalable capital and Trade Republic describing the requirements and step by step process on how you can open an account with them, i’ll link them in the description.
2. Crypto Exchanges
To buy cryptocurrency one needs an account with a crypto exchange. The issue here is that it can be very overwhelming if you look at a crypto exchange so many coins so many token.
But my favourite places to buy crypto are Binance and Etoro. Binance is a traditional cryptocurrency exchange while Etoro is a bit different but very beginner friendly. I have many tutorials on how you can buy crypto on etoro
3. Buying crypto and Stocks
After creating a brokerage account or a crpyto exchange account what now.
Well when it comes to the stock market investing in ETFs is always recommended for beginners. For example CORE MSCI World ETF is an ETF in which invested in 1594 different companies, so holding just 1 share in this ETF means that one is invested in 1594 companies. Another example is the S&P 500 which is an index tracking 500 of the biggest companies in the US. So 1 share in the Sp500 ETF means investing in 500 of the biggest companies in the US. I have a video in which I share my favourite ETFs here. And if you want to know about the difference in Stocks and ETfs watch this video here.
For cryptocurrencies Bitcoin and Ethereum are the biggest coins and have the largest market caps. Any cryptocurrency that came after Bitcoin is called an Altcoin and there are many altcoins in the market. With Altcoins there is a higher probability of growth but the risk is also exponential.
4. Taxes on Stocks and Cryptocurrency
In Germany there is a flat capital gains tax on any profit that one gains from selling stocks and ETFs and that is 26.75% . So for example if someone buys a stock at 100 Euros and sells that stock for 200 Euros they will have to pay a tax of 26.75 Euros as the tax is calculated on the profit.
There is however a 801euro tax free amount per year for singles and 1602 Euros tax free amount for couples. So as a single one can have a profit of 801 Euros per year tax free.
For cryptocurrencies if you hold your cryptocurrency for atleast 1 year and sell it afterwards there is going to be 0% tax on it. For example if you bought 100euros worth Bitcoin on 1st May 2020 and sold it on 2nd May 2021 for 300 Euros there will be absolutely no tax on it. But if you sell crypto before 1 year it is going to be taxed based on your variable income tax rate. You will have to submit an income tax return and declare that profit. In the event that your profit was less than 600€, it will not be taxed and you do not have to submit a tax return because of this profit. I have a detailed post on Taxes on Cryptocurrencies
5. Risks
A very important thing to consider is the risks involved in investing in the stock market and cryptocurrencies. The values for stocks go up and down, market crashes also come for example March last year there was a crash and the stock markets lost approximately 34% of their values. And in the cryptocurrencies market it is a constant rollercoaster of highs and lows and a drop of 10% in one days is not an uncommon thing. So for students it is very important that only the money which is not needed is invested. Maybe 25 Euros a month could be a great starting point to learn how the stock market and the cryptocurrency markets works. And would lay down a great foundation for when you get a full time job and have more money to save and invest.
6. My Investing Strategy
As said in the beginning my Investing strategy is that I invest 70% of my stocks savings amount in SP500, Core MSCI world and MSCI world emerging markets. While the 30% amount is for various individual Stocks. For Cryptocurrencies I mostly invest in Bitcoin and Ethereum.
To summarize students need a brokerage account like Scalable Capital or Trade Republic to buy stocks and ETFs and an account with a crypto Exchange like Binance or Etoro to buy cryptocurrencies. There is a 26.75% capital gains tax on profit from Stocks. And absolutely no tax on Cryptocurrencies which are sold after holding for more than 1 year. Like everything there are risks involved with investing in Stocks and Cryptocurrencies.
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*None of this is meant to be considered as investment, legal or tax advice . As I am not a financial expert nor a tax consultant please do your own reasearch and come to your own conclusions I am only sharing my experience with stock investing. The video and articles are accurate as of the posting date but may not be accurate in the future.