ETF — Exchange-Traded Funds
An ETF (exchange-traded fund) is a fund that tracks an index and trades on the stock exchange: one purchase gives you a stake in hundreds or thousands of companies. Geldchen's guidelines follow an order: first the emergency fund, then money for spending in the next 3 years, and only long-term money goes into the market, if your horizon and your readiness to sit through a drawdown allow it. Costs, including the Depot (brokerage account) fee, stay below 0.25% a year; the core capital sits in broad stock indices, with no more than 3 indices in total.
All thresholds in this article are Geldchen's editorial guidelines; no law sets them. They follow the Bogleheads approach. Bogleheads are a community of followers of John Bogle, the founder of Vanguard; in 1976 his company launched the first index fund for private investors [1]. You can check your own portfolio in the savings checklist.
What happens to your ETFs if the fund or broker goes bankrupt?
Your units stay yours: the fund's assets are kept separate from the management company, and your units are kept separate from the broker. The main risk of an ETF is a market fall, and no law protects you from that.
If you remember the MMM pyramid scheme or banks that shut down together with their customers' deposits, the phrase "your money is protected" doesn't reassure you. That distrust was earned through experience. Here is where German protection ends:
| What happened | What happens to your ETFs | Where protection ends |
|---|---|---|
| The management company or the depositary goes bankrupt | A German fund is a Sondervermögen (segregated fund assets): it is kept apart from the management company's own assets and is excluded from its insolvency estate (§ 92, § 99 Abs. 3 KAGB) [2]. In Irish and Luxembourg funds, a depositary bank (Verwahrstelle) holds the assets; if the depositary fails, the UCITS directive keeps them out of its creditors' reach [3]. Separation from the management company follows the fund country's law | No protection against falling share prices inside the fund |
| The broker goes bankrupt | Securities in your Depot are your property; you can transfer them to another broker [4] | Cash on the Verrechnungskonto (the broker's settlement account) is a deposit at the broker's bank or a partner bank, insured up to €100,000 per person (2026) |
| Embezzlement at the broker | Anlegerentschädigung (investor compensation): 90% of the claim (2026) [4] | No more than €20,000 |
| A market crash | MSCI World lost 57.8% in US dollars in 2007–2009 [5] | No protection |
Securities held with a broker in the country you moved from are protected under that country's rules, not German ones.
How much to keep in ETFs and how much in Tagesgeld?
The order is: emergency fund, then money for goals less than 3 years away, then long-term money. ETFs fit only the third part: money you won't need for years and whose 30–50% drawdown you are ready to sit through without selling. The emergency fund of 3+ months of expenses sits in Tagesgeld (an instant-access savings account), apart from everything else and quick to reach. Where to keep money for goals less than 3 years away is covered in the article on bonds.
Long-term money in savings accounts has a price: the real return there is negative. In September 2026, inflation in Germany was 3.3% (Destatis, flash estimate), and the average Tagesgeld rate was 1.74% (Biallo index, 10 September 2026) [6][7]. In the Boat phase (the first 24 months after moving), there is often nothing left beyond the emergency fund.
How much does an ETF cost per year?
Your annual cost is the TER (total expense ratio: the fund's yearly costs) of each fund, weighted by its share, plus the Depot fee as a percentage of the portfolio. The guideline is below 0.25% a year for everything together. Finanztip's selection includes global ETFs with a TER under 0.3% a year, a fund size of at least €100 million and an age of more than 5 years (2026) [8]: a fund company may close a small fund.
| Portfolio | Weighted TER | Depot fee | Total per year |
|---|---|---|---|
| €40,000: €32,000 in a fund with a TER of 0.20%, €8,000 in one with a TER of 0.40% | 0.24% | €0 | 0.24% |
| €10,000 in the same funds, Depot at €60 a year | 0.24% | 0.60% | 0.84% |
A fixed Depot fee hits a small portfolio hardest. A fund with a TER of 0.20% in a Depot that costs €60 a year gets below 0.25% only once the portfolio is larger than €120,000.
Tracking difference is the fund's real shortfall against its index over a year. Thanks to income from lending out securities, it can come in below the TER.
Which indices count as broad, and how many do you need?
A broad index holds hundreds or thousands of companies from many countries, or the whole market of one country. Stock funds on such indices hold the core capital, 60% of the portfolio or more. The portfolio holds 1–3 indices in total, including a bond index if there is one.
| Index | Companies, 2026 [5][9][10] | Markets | Overlaps |
|---|---|---|---|
| MSCI World | ~1,280 | 23 developed countries | No overlap with MSCI Emerging Markets |
| MSCI ACWI | ~2,460 | 47 countries: 23 developed and 24 emerging | Contains all of MSCI World |
| FTSE All-World | ~4,260 | almost 50 countries, developed and emerging | With MSCI World: developed markets twice |
| S&P 500 | ~500 | USA | With MSCI World: the US twice, a share above ~72% |
Index providers split countries differently: MSCI classifies South Korea as an emerging market (June 2026), FTSE as a developed one [11][12]. If you mix their indices, South Korea ends up in your portfolio twice or drops out.
A broad index gives you diversification across companies, but not an even spread: in MSCI World, the 10 largest companies weigh about 27%, and the US accounts for about 72% (2026) [5]. With RSUs (shares your employer hands over on a vesting schedule) from a US tech company, your dependence on that company is double: its shares are in the index too.
Two MSCI World ETFs from different fund companies are one index. The limit of 3 comes from the Bogleheads "three-fund portfolio" [1]. In Germany, selling to rebalance means paying tax on the gain, so realigning the weights with new contributions is more convenient.
Accumulating or distributing ETF: what changes for tax?
The rate is the same; the timing differs. A distributing (ausschüttend) fund pays out dividends, and tax is withheld at payout. An accumulating (thesaurierend) fund reinvests them, and tax is collected every January through the Vorabpauschale (advance lump-sum tax) and when you sell. A distributing fund also gets a Vorabpauschale if its payouts for the year are below the base return: for 2026, that is 70% × 3.20% = 2.24% of the fund's value at the start of the year [13][14].
| Item | Value, 2026 |
|---|---|
| Rate | 26.375%: 25% Abgeltungsteuer (flat tax on capital income) plus a Solidaritätszuschlag (solidarity surcharge) of 5.5% of that tax, without church tax [13] |
| Teilfreistellung (partial exemption) for equity funds | 70% of the income is taxed [13] |
| Sparerpauschbetrag (tax-free saver's allowance) | €1,000 a year, €2,000 for married couples [13] |
| Vorabpauschale for 2026 at a Basiszins (base rate for the calculation) of 3.20% | Up to ~€41 per €10,000 in an equity ETF beyond the allowance, debited in January 2027 [14] |
To stop the broker from withholding tax within the allowance, you give it a Freistellungsauftrag (exemption order). The general rules are in the article on investment income tax; the mechanics of the advance tax are in the article Vorabpauschale.
How does an ETF Sparplan work?
A Sparplan (savings plan) buys an ETF automatically for a fixed amount every month or quarter.
Measure the execution fee against the contribution: €1.50 on €50 is 3% of each purchase, on €500 it is 0.3%. It isn't part of the 0.25% guideline because it is a one-off charge on each contribution. The fund takes the TER out of its assets every day.
When do you need a professional?
- Moving out of Germany with funds worth about €500,000 at purchase price, or holding securities with a foreign broker: a Steuerberater (tax advisor).
- A portfolio review without product sales: a Honorarberater (fee-only advisor) or a paid investment consultation at the Verbraucherzentrale (consumer advice center).
FAQ
This is not legal or financial advice.
MSCI World or FTSE All-World: what's the difference?
MSCI World covers 23 developed countries; FTSE All-World covers almost 50, including China, India and Taiwan (2026) [5][10]. That is why the US share in FTSE All-World is lower: about 62% versus 72% [5][15]. MSCI's counterpart to FTSE All-World is ACWI.
How much tax will I pay when I sell an ETF at a profit?
On a €10,000 gain in an equity ETF, the tax is €1,582.50 (2026) if your Sparerpauschbetrag is unused. 70% of the gain is taxable, €7,000; minus €1,000, that leaves €6,000, and the tax is 26.375% of it [13]. All Vorabpauschale amounts from the years you held the fund are subtracted from the gain in full, including those your Sparerpauschbetrag covered, so the same income isn't taxed twice [13]. A German broker withholds the tax itself.
I'm leaving Germany. Will I be taxed on unrealized ETF gains?
Only on large amounts. Since 1 January 2025, your units count as sold on the day you leave if both conditions are met (§ 19 Abs. 3 InvStG) [13]:
- you were tax-resident in Germany for at least 7 of the last 12 years;
- per fund: on the day you leave, the units you hold cost €500,000 or more to buy, or at any point in the last 5 years you owned 1% or more of the fund.
The threshold is counted per fund and at purchase price. If you move back to Germany within 7 years, the tax may fall away. With an amount near the threshold, see a Steuerberater before you leave.
Sources
- Bogleheads wiki — Bogleheads® investment philosophy; Three-fund portfolio; John C. Bogle, 2026. https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy, https://www.bogleheads.org/wiki/Three-fund_portfolio, https://www.bogleheads.org/wiki/John_C._Bogle
- Kapitalanlagegesetzbuch (KAGB) — § 92 Sondervermögen, § 93 Abs. 2 (fund assets are not liable for the management company's debts), § 99 Abs. 3 (excluded from its insolvency estate), gesetze-im-internet.de, 2026. https://www.gesetze-im-internet.de/kagb/__92.html, https://www.gesetze-im-internet.de/kagb/__99.html
- Directive 2009/65/EC (UCITS), consolidated version of 16 April 2026, Art. 22: fund assets are out of reach of the depositary's creditors if it goes bankrupt — EUR-Lex, 2026. https://eur-lex.europa.eu/eli/dir/2009/65/2026-04-16/eng
- BaFin — Einlagensicherung und Anlegerentschädigung: deposits up to €100,000, investor compensation of 90%, at most €20,000, securities in a Depot remain the client's property, 2026. https://www.bafin.de/DE/verbraucherinnen-verbraucher/themen-finanzprodukte/geldanlage/einlagensicherung-anlegerentschaedigung/einlagensicherung-anlegerentschaedigung_node.html
- MSCI — MSCI World Index (USD), Index Factsheet, 2026: number of constituents, US share, 10 largest constituents, maximum drawdown. https://www.msci.com/documents/10199/255599/msci-world-index.pdf
- Statistisches Bundesamt (Destatis) — Inflationsrate im September 2026 voraussichtlich +3,3 % (flash estimate), 30 September 2026. https://www.destatis.de/DE/Presse/Pressemitteilungen/2026/09/PD26_348_611.html
- Biallo — EZB-Leitzins erhöht: Wie entwickeln sich die Sparzinsen? (Tagesgeld index 1.74% as of 10 September 2026), 2026. https://www.biallo.de/geldanlage/news/ezb-leitzinserhoehung-september-2026/
- Finanztip — ETF-Vergleich: Das sind die besten Indexfonds 2026 (selection criteria for global ETFs), 2026. https://www.finanztip.de/indexfonds-etf/
- MSCI — MSCI ACWI Index (USD), Index Factsheet, 2026. https://www.msci.com/documents/10199/255599/msci-acwi-net.pdf
- justETF — FTSE All-World ETFs: 4,264 companies as of 30 June 2026, list of countries, 2026. https://www.justetf.com/en/how-to/ftse-all-world-etfs.html
- CNBC — MSCI keeps South Korea as emerging market, 24 June 2026. https://www.cnbc.com/2026/06/24/msci-south-korea-emerging-market-indonesia-review-extended.html
- FTSE Russell — FTSE Equity Country Classification, March 2026 Interim Update (South Korea as a developed market), 2026. https://www.lseg.com/content/dam/ftse-russell/en_us/documents/country-classification/ftse-interim-country-classification-review-2026.pdf
- Einkommensteuergesetz § 20 Abs. 9 (Sparerpauschbetrag), § 32d (25% rate); Investmentsteuergesetz § 18 (Vorabpauschale, including for distributing funds), § 19 Abs. 1 (gain on selling units minus earlier years' Vorabpauschale) and Abs. 3 (Wegzug, as amended by the Jahressteuergesetz 2024), § 20 (Teilfreistellung 30%) — gesetze-im-internet.de, 2026. https://www.gesetze-im-internet.de/estg/__20.html, https://www.gesetze-im-internet.de/invstg_2018/__18.html, https://www.gesetze-im-internet.de/invstg_2018/__19.html, https://www.gesetze-im-internet.de/invstg_2018/__20.html
- Bundesministerium der Finanzen — BMF-Schreiben vom 13.01.2026: Basiszins zur Berechnung der Vorabpauschale gemäß § 18 Abs. 4 InvStG (3.20%), 2026. https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Steuerarten/Investmentsteuer/2026-01-13-basiszins-berechnung-vorabpauschale.html
- Vanguard — FTSE All-World UCITS ETF: index breakdown by country as of 31 August 2026, 2026. https://www.vanguard.co.uk/professional/product/etf/equity/9679/ftse-all-world-ucits-etf-usd-accumulating