How to Buy Shares in Germany 2023

Summary

According to World Data Info, Germany has the fourth-largest economy in the world, just behind the United States of America, China, and Japan. By every metric, the country is an economic powerhouse. It is home to the Frankfurt Stock Exchange, the 12th-largest stock exchange in the world. Companies listed on the Frankfurt Stock Exchange include Adidas, Volkswagen, Daimler AG, BMW, Siemens, and so on. It also has 6 other stock exchanges.

A good population of German citizens buys stocks online. About 17% of Germans are buying stocks, and most of them do it online. That means over 14 million people constantly invest in shares, with many more looking to get in on the action and purchase some for themselves. 

In this guide article, we will look at how to buy shares in Germany considering all the pros and cons, the tax system, and the best shares to buy now. We will also look at how to choose the right broker by looking at their account opening process, fees, commissions, and trading platforms available. Finally, we will go through various internet communities to see opinions from traders on stock trading in Germany.

How to Buy Shares in Germany?

To buy shares in Germany, you need to choose a trustworthy broker to trade with. You can select from any of the brokers in the table above. When you have chosen a good trader, follow the steps listed below:

1. Select a Broker
2. Create an Account 
3. Deposit Funds 
4. Search for Shares
5. Buy the Shares 
6. Monitor your Portfolio

What Markets can you Buy Shares from in Germany?

Just like any other physical or virtual market, German stocks have their own markets. These stock exchanges contain companies like Volkswagen, Daimler, BMW, and Adidas. Some of the most common stock exchanges where German investors can buy stocks are:

Frankfurt Stock Exchange

This is the largest stock exchange in Germany and the 12th-largest in the world. Examples Of companies listed on the Frankfurt Stock Exchange include Adidas AG, Daimler AG, Volkswagen AG, Siemens AG, and Allianz SE. 

Borse Berlin AG

Although not as large as the Frankfurt stock exchange, the Borse Berlin stock exchange is home to some of the finest German companies. Some of these companies include Allianz SE and Mercedes Benz Group AG.

New York Stock Exchange (NYSE)

The New York Stock Exchange (NYSE) is the largest stock exchange in the world by far. It has a market cap of over $22 trillion, and its average daily trading volume exceeds $1.2 billion shares. It is open to traders in most countries all over the world, including Germany. The NYSE is home to some of the world’s most well-known companies, including Apple, Coca-Cola, Johnson & Johnson, and Microsoft. 

NASDAQ

NASDAQ is the second-largest stock exchange in the world, also located in the USA. NASDAQ is home to some of the world’s most innovative and dynamic companies, including Amazon, Facebook, Tesla, and Netflix. The exchange is known for its technology-focused listings and is a popular choice for growth-oriented companies seeking access to public markets. It is open to stock traders in many countries around the world, including Germany.

London Stock Exchange (LSE)

The London Stock Exchange (LSE) is the second-largest stock exchange in Europe, only behind Euronext. It has a market capitalization of over €3.6 trillion and is home to some of the world’s largest and most well-known companies, including BP, GlaxoSmithKline, HSBC, and Unilever. Stock traders in Germany can buy shares from companies listed on the LSE.

Madrid Stock Exchange

The Madrid stock exchange is another large stock exchange located in Europe, specifically Spain. It is one of the oldest stock exchanges in the world and is home to Spanish companies like Banco Santander, Telefónica, Repsol, and Inditex (Zara).

Hong Kong Stock Exchange

The Hong Kong Stock Exchange, which has a total market value of more than $4 trillion, is the seventh-largest stock exchange in the world. It is home to massive companies like Tencent Holdings, China Mobile Ltd, and CK Hutchison Holdings Ltd.

Euronext

Euronext is the largest stock exchange in Europe. It is a borse that was created in 2000 from the merger of the Amsterdam, Brussels, and Paris exchanges. Since then, it has expanded with acquisitions and mergers with other exchanges in Dublin, Brussels, and Oslo. It recently acquired the Borse Italiana from the London Stock Exchange, largely increasing its market cap.  

What are the Fees for Buying Shares in Germany?

Buying stocks in Germany is not free. You have to pay fees for using a broker and carrying out transactions with them. Some of the common fees you might encounter are:

Spreads

Spreads are the most common fees you will pay a broker. Simply put, it is the difference between the bid and ask price of a stock. Brokers will often add a little markup to both the bid and ask price of each stock, so if you buy and sell stocks on their platform, you will indirectly pay a price.

Commission

Brokers like Degiro and Hargreaves Lansdown (HL) often charge commissions for stock trading. Degiro charges up to 1 € per transaction, while HL can charge you as much as 13.57 € per month depending on the number of transactions you make. On the other hand, brokers like eToro and Capital.com offer commission-free trading, which means they don’t charge a commission when you buy stocks through them.

Deposit and Withdrawal Fees

Some brokers charge you for depositing money into your trading account or withdrawing from the account.

Conversion Fees

Some brokers also charge you for converting from one currency to another for the purpose of trading.

Inactivity Fees

These are fees you pay to brokers when you leave your account dormant for a long time, like 6 months or more.

Pros and Cons of Buying Shares in Germany

Some of the pros and cons of buying German shares include:  

How to Choose the Broker I Need to Buy Shares from in Germany?

Choosing the right broker to trade German stocks is not very easy. However, there are different factors you can look at to help you with the process of selection. Some of them are:

Regulation

A well-regulated broker is a relatively safer broker than an unregulated one. This is because regulated brokers go through a lot of audits and must meet certain standards of security before they are allowed to operate. There are different financial regulatory bodies all over the world, from the SEC in the United States to the ASIC in Australia. 

In Germany, the most prominent regulatory body is Bundesanstalt für Finanzdienstleistungsaufsicht (“Federal Financial Supervisory Authority” in English), also known as BaFin. BaFin regulates all transactions and operations of stock brokers in Germany. If you want to buy shares in Germany, check that your broker is registered under BaFin before signing up with them. 

Markets

Before you start using a stock broker, check that they have access to markets where German stocks are traded. Choosing a broker without access to German stock exchanges like the Frankfurt Stock Exchange or Borse Berlin is a waste of time as you wouldn’t be able to trade German stocks on their platform. 

Check the broker’s website to confirm that they offer the exchanges you are interested in before you sign up with them.

Platforms

Check the platforms offered by the stock broker and confirm that they are suitable for your trading needs before signing up with them. Today, many brokers offer their own proprietary trading software instead of using common and widely-used trading platforms. These proprietary trading platforms are exclusive and more streamlined to the needs of traders using that broker. You can check the features of the trading platform using a demo account to tell if it is a good fit for you. 

Other brokers offer common platforms like MetaTrader (MT4 and MT5) and cTrader. If you love using these platforms, you can sign up for a broker that offers them. 

Trading platforms are very important, as the right platform makes trading easier for you. Ensure you do your due diligence here before selecting the broker with the trading platform that meets your needs.

Offering

Some brokers offer real shares, while others offer CFDs. CFDs (Contracts for Difference) are contracts between the trader and the broker that allows the trader to place trades on the future position of an asset. A trader can bet on where they think a particular stock will be in the future and open a buy or sell position on the stock CFD. By doing so, they don’t own underlying stocks in the company, just contracts showing the position speculated.

Depending on your preference, you can choose to buy and sell stocks using CFDs or by buying real stocks from the company. However, it is important you choose a broker that offers the kind of investment you are interested in. eToro, for example, offers both real stocks and stock CFDs, while Capital.com offers only stock CFDs to traders.

Trading Commission

Buying shares in Germany often comes with some costs, and trading commission is at the top of the list of charges you have to deal with. Find out the commissions offered by brokers before trading with them and if you are okay with paying the charges. Alternatively, you can choose commission-free brokers like eToro and Capital.com to reduce costs.

What are the Popular Trading Platforms Used to Buy Shares in Germany?

A trading platform is a piece of software that connects you to the stock market for the purpose of buying shares. Trading platforms often provide tools like charts, orders, news, notifications, etc. needed for good fundamental and technical analysis. 

There are many trading platforms for traders, some of them are proprietary and exclusive to the broker offering them, while others are widely-used and open to any broker that wishes to use them. Let’s go through these two types of trading platforms – proprietary trading platforms and MetaTrader 5, one of the most popular and widely-used trading platforms. 

Proprietary Trading Platforms and Apps

A proprietary trading platform is owned by a specific broker and fully exclusive to traders using the broker. They have the advantage of being streamlined to the needs of the particular broker and also being customizable. Brokers like eToro and Capital.com have proprietary trading platforms for traders registered with them. 

Proprietary trading platforms are available on web, desktop, and mobile devices. You can download them and use them as applications on your mobile device. The upside of this is getting to buy and sell German shares on the go. You can also choose to use them on your desktop using the web option on the website of the broker or downloading a desktop application that can be used on your desktop.

MT5 Platform & App

The MT5 platform is one of the most widely-used trading platforms in the world. MT5 is short for MetaTrader 5, which is a MetaTrader trading platform. MT5 provides great charts, tables, a clear activity dashboard, data visualization, and other important trading features. It is an upgrade of the MT4, another widely-used MetaTrader trading platform.

Although MT5 is not as flexible as proprietary trading platforms, it is a great platform to work with and is loved by many traders. It has an app for mobile devices that allow traders to trade German shares via a selected broker’s server. Features like real-time notifications are available on their mobile apps.   

What are the Best Shares to Buy in Germany?

Traders buying stocks in Germany are not limited to stocks on German exchanges alone. Investors can buy stocks of companies listed in the New York Stock Exchange, NASDAQ, London Stock Exchange, and other major stock exchanges in the world. 

Stocks like Tesla, Amazon, Apple, Facebook, Volkswagen Group, Daimler Truck, Vonovia, SAP, and many others are great stocks to invest in for different reasons. For example, Tesla has experienced massive growth in revenue in the past 2 years, leading to a rapid rise in its share price in 2022. SAP is another good stock to look at if you are interested in investing in German company shares. This software company has produced some of the best earnings per share numbers in 2022, beating market estimates while also increasing revenue in the past 3 years. It is one of the hottest stocks to watch out for in Germany right now.

Are Shares Taxed in Germany?

As a trader in Germany, you have to pay a withholding tax on your capital gains. The withholding tax is 25% of the trader’s gains above 801 € for singles and 1602 € for couples. These figures (801 € and 1602 €) are the tax-free allowances for singles and couples annually. You will be taxed on gains after you have surpassed these amounts. You only pay a withholding tax on the profit after you have passed these gains, and not on the whole amount you invested.

What Reddit and Quora Say About Buying Shares in Germany

Before you start trading shares in Germany, it is important you go through a few reviews from traders on the internet who have done it and see what they have to say about it. We have gone through reviews from traders/investors on Quora and Reddit to obtain important information on how to buy shares in Germany.

Reddit

Reddit is one of the most used social communities in the world, with over 500 million users, all known as Redditors. There are thousands of subreddits on the platform, and each one of them focuses on an important topic, like sports, finance, investing, crypto, etc. We went through a few of these subreddits to see traders’ opinions on buying shares in Germany.

The first thread we found about this topic was on the r/germany subreddit. An international student from India living in Germany wanted to know if they could invest in German stocks and how they could go about it. There were a few comments and responses from people who gave some important information on how the Original Poster (OP) could go about it.

One Redditor explained that as a resident of Germany, the original poster could buy and sell shares with any broker that allows trading within the country. He gave some examples of some of these brokers: eToro, Trade Republic, Interactive Brokers (IBKR), and so on. The Redditor also mentioned that the OP could decide to self-report the taxes by themselves or ask the broker to take the taxes out of their capital gains.

Another Redditor explained that the OP had to register with a reliable broker that could help them handle their capital gains taxes in Germany. They recommended eToro for this task. They also noted that eToro could allow the OP to set up their account as an Indian account and pay taxes as an Indian would. 

On another subreddit thread, we found information from a user who wanted to trade in Germany, having recently moved in from Latin America. They got a lot of important help and advice from the Redditors at r/AskAGerman.

One Redditor told the user to get a German tax number and choose a broker to invest with. The broker, in compliance with the laws, will automatically deduct taxes on gains above 801 € and send the trader a tax confirmation once every year. This allows the trader to fill out their tax declaration easily and avoid problems that are associated with committing tax fraud. In addition to this advice, the Redditor also redirected the user to check out another subreddit where they could get better information on how to invest in Germany.

Another Redditor advised the OP to get a Steuer ID (German tax ID) and register with brokers like Trade Republic and Smart Broker. These brokers verify traders’ tax IDs and passports before allowing them to trade on their platforms.

Quora

Just like Reddit, Quora is a social community with hundreds of millions of users all over the world. The platform offers users the chance to discuss a wide range of topics from politics to finance and sports. We were able to go through some threads on Quora and bring out some important information on how to start trading shares in Germany.

In the first thread we went through, a Quora user asked how he could invest in stocks as a US citizen living in Germany. The first Quora user to respond recommended Interactive Brokers, a very low-cost US broker with a great reputation that does business outside the United States.

On another thread, the OP asked, “How does a student in Germany invest 1000 € in stocks right now?”. A Quora user answered the question in a few paragraphs, giving important tips on how the student can invest that amount in the stock market. Among other things, he advised the OP to diversify their portfolio, avoid high volatility stocks until they become more proficient at trading, and avoid trading penny stocks.

On another thread, a student in Germany wanted to know how they could learn about investing in the German stock market without actually investing. A Quora user advised them to open an account with Investopedia and play the real-world stock market simulation game. Traders can invest in this game with virtual funds, more like a demo account. Investopedia uses data from real stock markets to determine the value of a trader’s investment per time.

Bottom Line

Trading stocks in Germany is possible and highly advisable since the country has a powerful and fast-growing economy. Also, share trading is common in the country, with over 14 million Germans investing in the stock market. The biggest stock exchange in Germany is the Frankfurt stock exchange, and it is the 12th-largest stock exchange in the world. Companies like Adidas, Volkswagen, Mercedes Benz, etc. are listed on the Frankfurt stock exchange. 

If you are confused about how to buy shares in Germany, the first thing you need to do is register with a broker. Before you select a broker, it is important to do a little research and find out if they have characteristics that suit your needs. Check the broker’s regulations, platforms offered, fees and commissions you may have to pay, and investments offered by the broker. You may find that a broker has either a proprietary trading platform or a widely-used platform like MT5 or cTrader. Some of the best shares to buy in Germany include Tesla, Amazon, Apple, Facebook, Volkswagen Group, Daimler Truck, Vonovia, and SAP.