How to invest in ETFs in Germany – A detailed guide

Invest in ETFs in Germany

A Complete and Detailed Guide on how to invest in ETFs in Germany with the Scalable Capital App. Invest in ETFs in Germany as an expat.

What are ETFs?

Firstly, what are ETFs?

For people who are new to the concept investment, ETFs may sound like a complicated term. Especially in comparison to more regular terms such as Shares, stocks. However, it is not that complicated at all!

An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund. However, unlike a mutual fund, ETFs can be bought and sold on a stock exchange. Just like regular stocks.

In simpler words, ETFs are a collection of stocks that trade on an exchange. ETFs can contain all types of investments, including stocks, commodities, or bonds. Rather than one asset, ETFs give you the chance to invest in multiple underlying assets.

Types of ETFs

You can categorize ETFs in several ways. For instance, based on the way an ETF is managed, you can segregate it as Passive or Active. Passive ETFs aim to replicate the performance of a broader index—either a diversified index such as the S&P 500 or a more specific targeted sector or trend. Whereas Actively managed ETFs typically do not target an index of securities. They rather have portfolio managers making decisions about which securities to include in the portfolio.

In addition to that, there are other categories of ETFs:

  • Stock ETFs : a basket of stocks to track a single industry or sector.
  • Bond ETFs : Collection of investments in underlying Government & corporate Bonds
  • Industry/Sector ETFs : Focusing purely on a particular sector.
  • Commodity ETFs : Focusing on commodities ( for example, Gold)
  • Currency ETFs : Tracks performance of domestic & foreign currencies.

How to find ETFs to invest in Germany?

When you are looking for ETFs or other funds to invest in, websites like justetf.com give you all the details necessary to find ETFs of your choice for certain market benchmarks or index. What do I mean by market benchmark or index? Let’s say that you are interested in investing in S&P500 or MSCI World. You will first need to know what these indexes are and what do they contain exactly.

This you can found by going through their official websites or the PDFs that they have made publicly available. (It is actually much simpler than it sounds).

For example, if you find information about S&P500, you will find PDFs with more details like the following:

How to find ETFs in Germany
S&P500 or The Standard and Poor’s 500 is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States

Okay, so we now know what S&P500 is. Now let’s take a look at MSCI World market index. What do they say on their website?

MSCI World Index essentially is a combination of 1540 large and mid cap companies from 23 Developed Markets.

MSCI World also gives you the benefit that when you are investing in it, you will be ‘more diversified’ and hence have a ‘lesser risk’ than simply investing in USA like in the case of S&P500. But it also means that the returns wouldn’t be as high or as low as investing in just USA.

Here is how the companies are distributed within MSCI World:

The majority of companies in the MSCI World Index are still from the USA as they are the largest and best performing, but you also get exposure to other countries like Japan, United Kingdom, Canada, France, Germany and so on.

Searching for ETFs in Germany

Now once you have decided on what market index you’d like to invest in on the basis of its historic returns (again, historic returns do not mean at all that it will keep performing the same way in the future) and future growth potential, you can go to justetf.com and search for the index. When you search for MSCI World, then you will come to a page like this which will give you more details about it and what kind of providers have MSCI World ETF available for investing on the market.

From here you can choose which criteria is more important for you in an ETF. Should it be the largest? Or the cheapest? Should it give you the best return? (Returns should theoretically be same as they are all tracking the same index, but there are always some real world differences). Another criteria to look for could be, should the ETF be physically replicating or not?

A rule of thumb is to always pick ‘larger funds’ because their possibility of getting liquidated or getting merged with other ETFs is very low. But even if your ETF provider e.g. iShares, Xtrackers, Lyxor goes bankrupt, you do not loose your securities. The funds will simply be merged with another provider and you will have all the underlying stocks which you bought with the market index.

You can directly paste the ISIN/WKN Number on your Broker!

Now once you have selected a particular ETF, you simply have to copy the ISIN or WKN number so that you can paste it in your broker and look if it is available or not! Many times justetf will also directly show it on their website if a particular broker can be used to invest in a particular ETF or not.

Once you find the ETF’s ISIN or WKN number, you simply have to paste it in your broker and look for it. I use Scalable Capital as my broker and it has the vast majority of ETFs available for investing, including the ETF that I showed you above.

That’s why new investors love ETFs! It is simple, broadly diversified and completely passive to invest in.

ETFs in Germany – The best choice?

As an expat in Germany, you have several options to invest in. You can invest in stocks, ETFs, Cryptocurrencies, or simply save up money in a savings account. Although the last option is a poor choice, it does remain a popular one. Many people believe investing money in stocks or ETFs would be risky.

However, that is not the case at all. In fact, you can start investing in stocks & ETFs as a beginner. Depending on how much risk you are willing to take, you can divide your investments. In an older article, I explained how you can invest upto 1000 EUROS in Germany as a beginner. This strategy includes a simple categorization of your investments. Check out the article below for more information!

ETFs in general are a lot risk averse than stocks. This is because the performance of an ETF is not dependent on just one stock, but a collection of stocks. And it is highly unlikley that all stocks perform bad at once. So if you are a person that wishes to make risk free investments, ETFs are for you!

How to Invest in ETFs in Germany!

You can very easily start investing in ETFs. Here is how you can get started!

Find an Investment Platform!

ETFs are available on most online investing platforms, such as e-brokers in Germany. You need to choose the best broker for you to invest in ETFs. And my choice for this would be the best broker in Germany, Scalable Capital.

Scalable Capital is one of the best brokers in Germany. From my own experience, it is by far the best option for you to invest in ETFs. There are over 1300 ETFs that you can invest in the Scalable Capital App. With the FREE Broker plan, you get to invest in ONE ETF at ABSOLUTELY NO COST. You will have no opening fee, no maintenance fee, no transaction fee! There are 600+ ETFs from the PRIME Partners of Scalable Capital – Invesco, Extrackers and iShares. Overall, Scalable Capital simply is the best choice for investing in stocks & ETFs in Germany.

Step 1 : Open a Scalable Capital Depot to Invest in ETFs in Germany

The first step you can take to invest in ETFs in Germany is to open a depot at Scalable Capital! It is a fairly easy process to open your depot. You can refer to articles I have written earlier, or simply watch the tutorials on my Youtube channel Brandevise.

Step 2 : Choose your broker plan

Firstly you need a depot account to start investing in Germany. But what Scalable Broker plan suits you the most?

When it comes to the FREE Broker plan, you will get 1 FREE ETF. On the other hand, with the PRIME broker plans you can invest in 600+ PRIME partner ETFs for free of cost. So to make this choice, you can use your expertise. If you are a beginner, it is better to go with the FREE Broker plan. You can invest in one ETF for free, with the FREE Broker plan. You also can invest in ETFs as a savings plan. As you learn more, you can upgrade to the PRIME Broker plans. Scalable Capital is flexible and will let you switch plans when you wish to do so!

Step 3 : Open the Scalable Capital App to search for ETFs in Germany

With the Scalable Capital App, you can search for all the ETFs you can invest in Germany. Do keep an eye out for the ‘P’ symbol next to a fund once you search it up. This indicates that the fund is a PRIME Partner of Scalable Capital. Invesco, ishares, and Extrackers are the PRIME partners of Scalable Capital. You have the choice of 600+ ETFs to invest in.

Here is a FREE Tip from my side! If you are a beginner, you can go with a popular ETF choice like CORE MSCI World. It would be a safe and good standard ETF you can start investing with.

Step 4 : Authentication of the ETF

Once you choose the ETF check for the ISIN & WKN numbers to verify if the ETFs are authentic. An International Securities Identification Number (ISIN) is a 12-digit alphanumeric code that uniquely identifies a specific security. The organization that allocates ISINs in any particular country is the country’s respective National Numbering Agency (NNA). Similarly, The WKN (“Wertpapierkennnummer”) was the German six-digit alphanumerical code for the identification of a security. However, it has been widely replaced by the internationally used identification ISIN.

Step 5 : Kaufen!

 Next step, proceed to ‘kaufen’ to choose the amount you want to invest!

You have the option of both on Scalable Capital: either setting up a savings plan so that you invest monthly or making a one time purchase.

You can also invest in a savings plan instead of one time purchase of ETFs. 

A Savings Plan (sparplan) is an automated investment plan on Scalable Capital that allows you to follow a pre-determined investment strategy where you invest a fixed amount of money on a monthly basis. As we mentioned early, a savings plan is an awesome tool for expats who wish to invest regularly but cannot set aside the time for it everyday.

The highlighted button on your Scalable Capital dashboard allows you to simply set up a savings plan with which you are able to start investing in the particular ETF every month completely passively.

If you want to learn more about how to set up a savings plan for an ETF in Germany, you can read the article below:

In Conclusion

In 5 simple steps, you have now started your investing journey. ETFs in Germany are a great way to ensure relatively risk free investments. With a savings plan especially, investing in ETF will become a frequent habit.

However, do note that I claim ETFs as the best investment tool from my own personal experience, and I am not a financial advisor. You should do your own research on what the best investment tool is for you. Best of luck!

Do you prefer to watch a video on this topic? Check this out!

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