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How to trade stocks in Germany

BanksThis is a guest post by Michael from Dividenden-Sammler who lives in Germany. When I wrote my post about investing in Australia I thought I might ask other investors around the world if they can share their story and the way of investing in their country. From their stories we can learn what trading opportunities or troubles they have. This is Michael’s story. He diced to start blogging about investing into stocks to show other people in Germany that investing into dividend paying stocks can be as safe as mutual funds or savings accounts but with a lot larger profits. Visit his blog and give him your support.
 
 

Hello, my name is Michael from the dividend-collectors blog (www.dividenden-sammler.de). I am 39 years old and I have been interested in stock investing for over 20 years!

At the age of 16 I bought my first two shares: BASF and BMW. For every purchase I had to pay a commission of about 50-60 DEM (= 25-30 EUR ). Of course, the purchase was absolutely unprofitable, but I had my first two shares.

My bank required an annual fee of 120 DEM (= 60 EUR ) plus additional 25-30 EUR commission per trade. These were large amounts, but at that time, there were no alternatives.

In 1990, the first direct banks launched.

A direct bank is a subsidiary of the “big” brick banks. The difference between these two is that the Direct banks run their business only via a phone or Internet. They do not have any physical branches which need maintenance and overhead to run.

Since I could withdraw my money for free at the local branch from the “big” banks, (editor’s note: In some European countries banks charge a deposit and withdrawal fee) I switched to direct banking. Now, I am saving a lot of money in my trading account.

Here is a comparison:

An annual account maintenance fee: 0 EUR (formerly 60 EUR)
A trade commission: approx. 10-12 EUR (formerly 25-30 EUR)
An annual deposit fee: 0 EUR (previously about 50 EUR)

Here is an example of a current cost comparison as of 11/25/2013 – between Deutsche Bank and Comdirect Bank:

 

Trade size in EUR Deutsche Bank commission in EUR Comdirect Bank commission in EUR
1,000 20.00 9.90
5,000 35.00 17.40
10,000 70.00 29.90

 
An annual deposit fee comparison at a depot with 50 companies:

 

Account value in EUR Deutsche Bank fee EUR Comdirect Bank fee in EUR
10,000 270.00 0.00
50,000 350.00 0.00
100,000 700.00 0.00

 

Here you can find more details about the cost structure of Deutsche Bank. And here is a link to the cost structure of Comdirect Bank.

The change to a direct banking in Germany can be very cost effective and should be done by everyone who lives and trade in Germany. The direct banking can provide a good and cost-saving opportunity.

Later, I invested a lot of my money in equity (mutual) funds and my gains were impressive. They rose larger and larger.

In 2000 I sold all my mutual funds, because my wife and I purchased a house. Since then, I did not invest in stocks much as I focused on paying off the house mortgage as soon as possible.

In Germany you have an option to make additional, irregular mortgage payments. That may, (depending on the mortgage contract), help you shorten the life of the mortgage by another year if you pay additional 10% off, for example – and if you have money for additional payments of course.

I’ve used that option, because at a rate of 6.5% paying off the mortgage faster was more profitable than buying stocks. It was also 100% safer and tax free.

Recently, I tried CFD trading (commodity futures trading) with some spare money. I didn’t lose, but I also didn’t make money. Every day, I sat in front of the computer for 4-5 hours trading contracts. It was very stressful and nerve-wracking. And I was happy if I could make a 1 EUR profit after one hour of trading.

When our house was fully paid off early in 2013, I decided to invest in stocks again.
dividends
While looking for information about dividend investing, I came across a lot of popular blogs. Almost all were from the United States, for example: Hello Suckers, Dividend-Mantra, and so on…

I decided to invest using the DGI (dividend growth investing) strategy.

But German companies declare and pay their dividends differently than those in the USA. For example, Daimler (Automobile) is a very good company. But they declare their dividend according to their annual profit. This is not a pure DGI strategy, because the dividend fluctuates greatly.

Nevertheless I own this company in my portfolio

In Germany there are about 80 million inhabitants. Only 5 million citizens own and invest in stocks! In the UK or US a lot more people own or invest in stocks.
Germans want safety, a safe interest, a life insurance policy, a debt-free house and good state pension benefits. The stock market and stocks are too risky for German people.

That’s why I started my blog “Dividenden-Sammler” in early November 2013 to show other people that stocks can offer a lot better long term return then any other investment and that the dividend stocks with a growing dividend can exceeds those returns even more!

Have fun and I wish everyone a lot of high dividend payments!
 
 





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