Start Investing in Germany – What you need to know to start saving

Today we are going to talk about the first steps you can take to start investing in Germany. Saving money by keeping you money in the bank is a safe way but your money is not safe from inflation. Inflation rates vary in different countries. The inflation rate in Germany was 1.35 percent in 2019 meaning your money lost 1.35% its value just by keeping it in the bank. To save your money properly there are many ways you can invest it. One of those ways is to invest it in the stock market.

To start investing you have to figure out if you want to do it yourself or hire a professional to do that. Assuming you want to do it yourself you will need to open a brokerage account. It is important that you open that brokerage account from a German broker as they automatically transfer your financial details to the German financial authorities so that the taxes are automatically managed. If your broker is non German, you will have to do those taxes yourself which is a hassle at best and could lead to criminal charges being filed against you if you fail to submit your gains to the authorities.

You can invest in stocks, ETFs (exchange traded funds) or Mutual Funds with your brokerage account ( there are other things like options, derivatives, bonds etc. but those are very complicated ).

A stock is a single security that signifies ownership in a company. An ETF is a basket of securities designed to offer exposure to a certain segment(s) of the market. A mutual fund is a vehicle that pools money from many investors to purchase a collection of stocks, bonds or other securities.

The risk with stocks is concentrated as it is based on investing in a single company. With ETFs and Mutual Funds the risk is diversified.

Like everything there are costs associated with buying or selling stocks. With Trade Republic there is a fixed 1 Euro cost each time you buy or sell (in addition to the capital gains tax). Comdirect has a percentage based cost system. With ETFs there is an additional expense ratio that tells you how much an ETF costs. The amount is skimmed from your account and goes towards paying a fund’s total annual expenses. Remember, the expense ratio doesn’t include the brokerage commissions you pay to buy and sell ETF shares.

Before you invest your money in any stock make sure you know what you are investing into as there are always risks associated with investing.

*None of this 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 video and article are accurate as of the posting date but may not be accurate in the future.

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