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Investing money: This is how getting started on the stock market works

Valeria Nickel, February 5th, 2021

Save money or invest - which makes more sense?

Lots of people would like to invest money - in stocks or maybe fixed income bonds and alternative investments. However, they often have too great a respect for investing in the stock market and other asset classes that go beyond saving money in the checking account or savings book.

This allows them to great profit opportunities escape. This is because equity investments in particular have so far achieved significantly higher long-term returns compared to the interest on savings deposits, even with a low-risk investment strategy. It is wrong to think that only professionals or rich people can invest money in the stock market. Of course, the decision and implementation of these investments takes time and initiative - but anyone can find it.

This post deals with the basics of investing capital in the stock market. General information on finance can be found here: Investing money for beginners.

What is the difference between the investment products of the bank and those of the stock exchange?

Banks often offer overnight money and fixed-term deposits as ways to invest money. The advantage of these security-oriented investments is that you Low risk is: Money in the call money account or fixed deposit account, for example, is up to an amount of € 100,000 through the European Deposit Insurance Fund secured.

But even if deposit protection makes overnight money and fixed-term deposits the safest investment options, investments here are currently usually not protected from annual inflation - and are thus becoming a problem for savers.

If, on the other hand, you invest the money in a company on the stock exchange, you run the risk that these companies will later become insolvent and you will lose money.

Bank deposits such as call money accounts and time deposit accounts are therefore something for investors who are more concerned about security. On the other hand, thanks to dividends or profits from price increases, they can achieve much higher interest rates and returns on their money on the stock market.

Which asset class is the right one for investing money also depends on the investment objective. For example, the money for retirement provision should be invested as securely as possible.

What are the best ways to invest money?

On the stock exchange there is many different investment productsthat money can be invested in. They can be divided into:

1 | ETF (Exchange Traded Funds)

Beginners ETFs, also called index funds, are often recommended. These are equity funds that are not actively managed by a manager, but passively invest in a stock index - such as the DAX - and thus replicate a market in its entirety. With an ETF, the investor benefits from a positive overall development of the market - and does not work “against” the market like a fund manager.

ETFs are also comparatively cheap due to their low (administrative) costs. In addition, they are associated with little effort and a relatively low risk.

2 | Funds

On the other hand, if you want to try to beat the average return on the market, you can invest money in an (actively managed) fund. This represents, so to speak, a basket of selected forms of investment and is managed by a fund manager.

Depending on which investments are bundled in the respective investment fund, it is referred to as an equity fund, mixed fund, real estate fund, etc.

3 | shares

If you prefer to choose your stocks yourself, it is a good idea to invest money in individual stocks. Here you have to be careful, however, that the risk is spread across the securities of several different companies and that the risks are sufficiently diversified within the investment.

4 | Bonds

In addition to stocks, money can also be invested in individual bonds. These are not listed company shares, but fixed-interest bonds from companies or states (e.g. federal bonds). Profits are not generated here with dividends or price fluctuations, but are paid out on the borrowed money, similar to a loan.

If you want to build your own equity or bond portfolio, you should know a little about the stock market. In addition to the profits, you should always consider the transaction fees incurred and the time-consuming compilation and maintenance of securities accounts.

5 | Leverage products

For SpeculatorsThose who are willing to take higher risks when investing and play more intensely with their luck can find leverage products such as derivatives, certificates or futures interesting.

This form of investment is particularly risky and many a trader has already lost a fortune with the complex financial products. Therefore, when investing, one should deal very intensively with the trading strategies and test them in demo accounts or sample portfolios before investing real money.

Tip: But there are also good and, above all, profitable investment opportunities
outside of the exchange: For example, you can invest money in tangible assets such as real estate or new forms of investment such as crowd investing in real estate or startups. Investors can now even invest money in personal loans via crowdlending. In the following, however, we want to concentrate on exchange products.

Try real estate crowdinvesting now for free

How and where can you invest money on the stock exchange?

You cannot simply “shop” stocks or investment funds directly on the stock exchange. Trading these investments is only possible with one Share portfolio and a corresponding clearing account possible. This is, so to speak, an account for money to be invested, while the custody account is a depository for the securities purchased.

Such a depository can be found in the classic way with a Bank open in a branch or online. Alternatively there is also Online broker. Before you decide on a provider, you should definitely compare the costs. You can save a lot of money here. As a rule, the fees charged by online brokers are generally cheaper.

What about the investment period on the stock exchange?

Before making any investment, you have to ask yourself how long you can invest or dispense with the money. Based on this, an investment can be made with the right one Investment period determine.

In bonds, for example, investors invest between three and seven years. The following rule applies: the more years, the higher the interest.

However, many investments have no maximum term at all, for example shares or most funds. In this case, the investment is terminated by the resale of the securities. If shares or units in a fund are worth more at the time of sale than they were at the time of purchase, the investor benefits from price increases.

In general, however, a longer investment horizon, from five years upwards, is recommended. This makes a solid average return more likely, since phases with poor price development can be sat out and price fluctuations on the stock market can be optimally used.

Overview of the investment duration of various exchange products

unlimited term

fixed term


open funds

closed funds



Leverage Products *

* Individual leverage products vary greatly in their design

How much money should I invest in the stock market?

In principle, there are no upper limits for shares - if you have a lot of money available and want to invest, the following principle applies: the more the better. However, certain minimum investments should be made. There are the following reasons for this:

1 | Costs reduce the return

High investment amounts reduce the proportionate costs when investing capital, for example through order fees.

What are order fees? When securities are bought or sold, an order is placed with the custodian bank, which is called an order. For each order, the bank usually demands a commission, which goes hand in hand with fees on the stock exchange.

Because of these costs, investors shouldn't invest less than € 1,000 in a share. Because the costs are otherwise disproportionately high compared to the investment amount and can only be recovered through a high return. So there are usually no mandatory ones, but logically sensible minimum investments for stocks.

How much money do you have to invest for the return to exceed a fee of € 15?

Investment worth € 500
positive only from 3% price gain
Investment worth € 1,000
positive from 1.5% price gain
Investment worth € 3,000
positive from a price gain of 0.5%

2 | Unilateral investments increase the risks

If you invest money in individual stocks, you shouldn't put everything on one horse: Invest your money in different companies and industries and diversify your capital investments in order to achieve sufficient risk diversification with a well thought-out portfolio composition.

In addition, you should not invest your money exclusively in the stock market. With a well thought-out asset allocation, you spread the risk not only across different securities, but across asset classes such as savings accounts, real estate or raw materials. Such a balanced portfolio with sufficient diversification naturally requires a lot of money.

3 | The more time the better

Invest only as much money as you really are at your free disposal to have. Be aware that short investment periods often do not compensate for declines in price "in time", making a loss on sale more likely. At longer investment periods looks different. So if you want to invest money in a particular purchase, property, or children's education over the next few years, you shouldn't invest that money in stocks.

Danger: Under no circumstances should you take out a loan to buy shares, but only invest your own money that is not absolutely necessary!

Can you invest in the stock market with little money?

If you want to start with a small investment, it is a good idea to invest money in equity funds or ETFs. The reason for this is that these financial products are already spread across different stocks. ETFs are also particularly inexpensive.

Investors can also invest smaller sums in stocks, funds, ETFs, etc. if they regularly - for example monthly - pay money into a savings plan. Even with small amounts of 10 € a month, it is possible for private investors to build up a fortune on the stock exchange.

Another advantage of savings plans is that you don't have to pay attention to the ideal timing to invest. Since you spread your money over a long period of time, the shares are purchased at an average price. Although this is above the cheapest price within a certain period, it is also below the most expensive ("Cost Average Effect").

So savings plans offer the opportunity to invest at average prices on the stock market - even with little money and often without high costs.

All in all, there are many different ways of investing money in the stock market - also for private investors. A solid basic knowledge of the investor regarding the individual investment products is the first step to long-term success.

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